The fashion group — parent to the Coach, Kate Spade and Stuart Weitzman brands — reported quarterly earnings Thursday before the market opened, improving on top and bottom lines thanks to strength across all three brands, especially in North America and China, and a continuation of gains in the e-commerce businesses.
The group raised several full-year targets as a result, causing shares to shoot up roughly 3 percent at the start of Thursday’s session.
“We delivered record sales this holiday quarter, highlighted by an inflection at Kate Spade, ongoing momentum at Coach and a return to pre-pandemic revenue levels at Stuart Weitzman,” Joanne Crevoiserat, chief executive officer of Tapestry, said in a statement. “The combination of bold initiatives, compelling product and effective execution enabled us to win with consumers across our brands. Based on these results, we are raising our revenue, operating income and [earnings-per-share] guidance for the fiscal year.
“Our performance over the last 18 months has demonstrated the advantages of our globally diversified, consumer-centric and data-driven platform,” Crevoiserat continued. “Through the Acceleration Program, we’ve made foundational changes that have successfully accelerated our growth at stronger margins, while making strategic investments to drive customer engagement and lifetime value. As we look ahead, we see significant growth opportunities and remain committed to creating value for all stakeholders.”
For the three-month period ending Jan. 1, total company net sales increased 27 percent to $2.1 billion, up from $1.68 billion a year ago, or up 18 percent when compared with pre-pandemic levels.
Coach, the firm’s largest brand, registered more than $1.5 billion in revenues for the quarter, up from $1.2 billion a year ago. Sales at Kate Spade rose from about $375 million to just over $500 million, while revenues at Stuart Weitzman topped $115 million, up from $84.5 million a year ago.
Tailwinds included the company’s digital businesses, which overall grew more than 30 percent, compared with 2021’s second-quarter fiscal results and nearly tripled compared with pre-pandemic levels.
In addition, both North America and China continued to be key growth drivers. In North America, revenues increased 35 percent, compared with the same time last year and were up more than 25 percent compared with pre-pandemic levels. Sales in mainland China rose in the mid-single-digit range, compared with a year ago and were up more than 35 percent compared with pre-pandemic times.
Tapestry added in a statement that it acquired more than 3 million new customers in North America in the last three months while also driving higher retention rates with more repeat shoppers and a return of lapsed shoppers across all brands.
The group logged nearly $318 million in profits for the quarter, up from $311 million the same time last year.
The firm now expects full-year revenues to be roughly $6.75 billion, compared with its previous estimates of $6.6 billion, and earnings-per-diluted share to be in the range of $3.60 to $3.65 apiece, up from the previously stated range of $3.45 to $3.50 a share. The company also plans to buy back roughly $1.25 billion in common stock during the current fiscal year.
“We continue to expect fundamental strength will persist and commend ongoing [average unit retail] focus,” Simeon Siegel, managing director and senior retail analyst at BMO Capital Markets, wrote in a note. “Tapestry was one of only six companies in our coverage that have improved net and gross leverage, suggesting there might be further upside going forward. And critically, as we have been discussing, we expect capital return to be a major theme this earnings cycle given material excess-cash generation as a percentage of market caps since COVID-19.”
The company ended the quarter with more than $1.6 billion in cash, cash equivalents and short-term investments and nearly $1.2 billion in long-term debt. The retailer has about 1,455 stores around the world.
Shares of Tapestry, which closed up 2.83 percent to $40.71 apiece Wednesday, are up 3.9 percent, year-over-year.