Tapestry Inc.’s recovery continues to take shape.
The fashion group — parent to the Coach, Kate Spade and Stuart Weitzman brands — reported quarterly earnings Thursday before the market opened, falling short on topline revenues, compared to the same time last year, but pleasing Wall Street nonetheless with increased profits thanks to strength in China and online.
Shares of Tapestry were up more than 2 percent premarket as a result.
“Our results significantly outpaced expectations driven by the successful execution of our Acceleration Program,” Joanne Crevoiserat, chief executive officer of Tapestry, said in a statement. “Our sharpened focus on the consumer fueled new customer acquisition across all brands with notable sales gains in digital and China. Importantly, for the second consecutive quarter, we generated strong operating income growth supported by a reduction in promotional activity and higher [average unit retail], as well as disciplined inventory and expense management. Further, we delivered this profit growth in the face of unprecedented COVID-19-related external headwinds, including pressured brick-and-mortar traffic, store closures and capacity limits, as well as higher freight costs and shipping constraints.”
For the three-month period ending Dec. 26, total company revenues were $1.68 billion, compared with $1.8 billion the same time last year. By brand, revenues at all three businesses declined. Sales at Coach were $1.22 billion, compared with $1.26 billion the same time last year, while revenues at Kate Spade slipped to $375 million, down from $430 million a year ago. Stuart Weitzman registered $84.5 million in revenues, compared with $115 million a year ago.
Still the company managed to log $311 million in profits, up from $298 million a year ago, thanks to renewed interest in the Coach and Stuart Weitzman brands.
During China’s Singles’ Day on Nov. 11, Coach was rated the number-one brand for handbags, luggage and leather goods on Tmall, while Stuart Weitzman was rated the number-one footwear brand on the platform through the holiday season. As a result, revenues grew more than 30 percent during the quarter, year-over-year, in mainland China.
“We believe Coach has momentum and is resonating with consumers,” according to a note from Jane Hali & Associates, a retail and brand investment research firm. “The Coach experience online and in-store is excellent. Before the pandemic, the brand offered various services in-store that enabled an easy pivot to a COVID-19-friendly shopping experience.”
Other bright spots included the company’s e-commerce channel, which grew triple digits during the quarter, year-over-year. In addition, digital represented one-third of all sales, or half of all revenue in North America.
Tapestry ended the quarter with $1.58 billion in long-term debt, $1.65 billion in cash and cash equivalents and 1,491 stores, or 960 Coach, 422 Kate Spade and 109 Stuart Weitzman locations.
The retailer is anticipating revenues for the year to increase in the high-single digits, or about 10 percent on a 53-week basis.
Shares of Tapestry, which closed up 3.44 percent a piece Wednesday to $34.60, are up more than 27 percent, year-over-year.