Tapestry Reports Better Than Expected Results in Q1, Driven by International Growth

Stephen Garner
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Tapestry, Inc. — the parent company of Coach, Stuart Weitzman and Kate Spade — delivered better than expected results, led by international growth, in the first quarter of 2023.

The New York-based fashion company reported net sales of $1.51 billion, up 2% from $1.48 billion in the prior year. The sales growth was primarily driven by the company’s international business, which rose over 5%, delivering 11% growth versus prior year.

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In Europe, sales increased 24%, fueled by higher international tourist traffic, notably from the Middle East and within Europe, as well as continued growth with local customers. For Greater China, sales declined 11% due to COVID related headwinds. The APAC region rose 9% versus prior year despite COVID-related headwinds in Greater China. Sales in North America rose slightly over last year, with low single-digit gains in the region’s direct business.

By brand, revenues at Coach were flat compared to the same time last year at $1.12 billion. On the company earnings call on Thursday, CEO Joanne Crevoiserat highlighted its core leather goods offering as what drove the heritage brand’s business this quarter. In footwear, strong revenue gains were fueled by new styles, including the Leah Loafer and the Lucy Sandal, as well as continued momentum in the men’s Lowline Sneaker, Crevoiserat noted.

At Kate Spade, revenues were up 7% in Q1 to $321.9 million versus $299.5 million the same period in 2021. The CEO said this brand’s Knott collection of bags continues to be number one. The company also saw a strong foundation of Kate Spade’s lifestyle positioning and delivered high single-digit growth across ready-to-wear footwear and jewelry.

At Stuart Weitzman, however, the footwear brand saw a 2% loss in the quarter, reporting revenues of $65.3 million, down from $66.5 million the same time last year. According to Crevoiserat, the brand saw growth in North America, aided by strength in the wholesale channel, while pressure remained in the highly penetrated Greater China region given COVID headwind. The CEO pointed out the brand’s Stuart family of products, which was launched earlier in the calendar year, as quickly becoming a staple within Stuart Weitzman’s offering. “This collection of pumps and boots drove 15% of sales and was a favorite among both new and existing customers,” she said. “At the same time, the recently introduced Soho Loafer delivers outsized growth.”

As of 2 p.m., shares for Tapestry were up almost 1%.

Looking ahead, Crevoiserat told investors on today’s call that the company is “well positioned” for holiday, despite revising its fiscal year 2023 outlook. “Our outlook reflects realistic expectations given the macro uncertainty,” she said. “Our eyes are wide open, and we have a prudent plan, and we’ll manage our business prioritizing long-term brand health.”

The company now expects revenue for the full year of between $6.5 billion and $6.6 billion, versus its previous guidance of $6.9 billion for fiscal 2023. This new expectation represents a slight decline versus prior year on a reported basis due entirely to approximately 450 basis points based on incremental currency pressure resulting from the further strengthening of the U.S. Dollar.

“Moving forward, although the environment is uncertain, our foundation is strong and the clarity of our vision is unchanged,” Crevoiserat added. “We will continue to be disciplined in advancing our strategic objectives through an unwavering focus on the consumer and a commitment to innovation.”

These results come two months after the company outlined a new three-year growth strategy at its 2022 Investor Day. Among the new goals includes new financial targets for the years ahead. The company now expects to achieve revenue of $8 billion by fiscal year 2025, reflecting a three-year compound annual growth rate (CAGR) of 6% to 7%.

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