For the three months ended June 30, net income rose 39.6 percent to $211.7 million, or 73 cents a diluted share, from $151.7 million, or 53 cents, a year ago. Adjusted diluted EPS for the quarter was 60 cents. The year-ago figures do not include results from the Kate Spade business, which the company acquired on July 11, 2017. Net sales rose 30.9 percent to $1.48 billion from $1.13 billion.
By brand, Coach posted gross profit of $762 million on net sales of $1.1 billion in the quarter. Global comparable-store sales rose 2 percent, including e-commerce. Kate Spade’s gross profit was $205 million on net sales of $312 million, as global comps slipped 3 percent. At Stuart Weitzman, gross profit was $37 million on net sales of $73 million.
Wall Street was expecting adjusted diluted EPS of 57 cents on sales of $1.47 billion. Share of Tapestry rose 2.6 percent to $48.68 in pre-market trading at 7 a.m.
Victor Luis, chief executive officer, said, “We achieved our annual sales and operating income guidance, driving significant growth while earnings per share outpaced our forecast. It was also a year of many milestones, as we completed the acquisition of Kate Spade and evolved into a true House of Brands, establishing Tapestry as our new corporate identity.”
Luis said the company has entered into purchase agreements to acquire Kate Spade’s operations in Singapore, Malaysia and Australia, as well as Stuart Weitzman’s business in Southern China. The acquisitions are part of initiatives that would allow each brand to have greater direct control over its international distribution.
He also noted that the Coach brand posted a strong finish to fiscal 2018, with positive fourth-quarter comps, led by “outperformance in North America.” The ceo said that in its first year as part of the Tapestry umbrella, Kate Spade “delivered double-digit earnings per share accretion, despite the strategic pullback in online flash and wholesale disposition.” As for the Stuart Weitzman brand, Luis said the fourth quarter continued to be negatively impacted by development and delivery delays.
For fiscal year 2019, the company guided diluted EPS to the range of $2.70 to $2.80. It forecasted revenues to rise at a midsingle-digit rate from fiscal 2018 to between $6.1 billion to $6.2 billion.
Luis said, “Looking ahead, we are focused first and foremost on execution. Our goal is to deliver strong revenue and operating income growth in fiscal 2019, while making the right strategic investments to support our long-term vision and drive a return to both double-digit operating income and earnings per share growth in fiscal 2020.”
He said the Coach brand will relaunch Signature as a brand icon, as well as utilizing technology and digital to enhance and modernize the customer experience. Fiscal 2019 will see the launch of the new collection from creative director Nicola Glass at Kate Spade, and at Stuart Weitzman the near-term focus will be on building infrastructure and capacity.