Acquisition costs connected with Kate Spade & Co. pushed Tapestry Inc. into a first-quarter loss, but adjusted EPS managed to beat analysts’ expectations by 6 cents.
Victory Luis, chief executive officer of Tapestry, said, “Our first quarter performance was in line with our expectations, reflecting the benefits of our diversified multibrand model, notably the contribution of Kate Spade to our consolidated results and double-digit growth at Stuart Weitzman.”
While there’s been some calendar shifts and inventory challenges due to natural disasters, Luis said the company has returned to growth in the second quarter and remains “on track to achieve the annual guidance we set out for Tapestry in August.”
Tapestry completed it $2.4 billion acquisition of Kate Spade in July, when it was still known as Coach Inc. The company changed its name at the end of last month to better reflect its new umbrella of brands.
Luis said the integration of its newest brand is progressing and in the quarter, “[W]e took significant actions to position the brand for long-term success. We began to implement our strategic initiatives including the pull back on wholesale distribution and flash sales, while taking substantial steps to unlock cost synergies.”
For the three months ended Sept. 30, the company posted a net loss of $17.7 million, or 6 cents a diluted share, from net income of $117.4 million, or 42 cents, a year ago. On an adjusted basis, net income was $117 million and diluted EPS was 42 cents. For the quarter, net sales rose 24.2 percent to $1.29 billion from $1.04 billion.
Wall Street was expecting EPS of 36 cents on sales of $1.31 billion.
By brand, Coach sales slipped 3 percent to $924 million, while global comparable store sales also fell 2 percent. Kate Spade sales totaled $269 million, as global comps fell 9 percent. At Stuart Weitzman, sales rose 10 percent to $96 million.
Luis, who said the company is well positioned for holiday, added: “We are confident in the opportunities for Tapestry as a whole and for each of our brands individually within the attractive and growing $80 billion global market for premium handbags and accessories, footwear and outerwear.”
Tapestry said it continues to expect diluted EPS for fiscal 2018 in the range of $2.35 to $2.40.
Shares of Tapestry were trading up 0.6 percent to $41.71 in Big Board trading at 9:45 a.m.