Coach parent Tapestry posts earnings miss amid deal with Capri Holdings

Tapestry (TPR), the parent company of luxury designer brands like Coach and Kate Spade, posts an all-around earnings miss in its fourth quarter, divulging a weakened forecast. Yahoo Finance's Brad Smith and Julie Hyman check out Tapestry's stock value while examining the impact its acquisition of Capri Holdings (CPRI) could have on its consumer base.

Video Transcript

JULIE HYMAN: Got to get to Tapestry as we continue on this retail theme. Those shares aren't doing a heck of a lot. The Coach parent company gave a weaker than expected guidance. Saw sales at Kate Spade and Stuart Weitzman fall from a year ago. This report coming, of course, after Tapestry announced the purchase of rival Capri Holdings in an $8.5 billion deal. That happening just last week.

So it's interesting to see the shares little changed here. If you look at the numbers, the company's forecast for the full year, its fiscal 2024, is at most $4.15. Analysts had been looking for $4.22. Revenue likewise coming in a bit short of estimates if you look at the forecast. I haven't had a chance to take a look at headlines from the call, but it's possible that commentary they made is helping the shares from decreasing on what looks like sort of lackluster numbers here.

BRAD SMITH: Yeah. I mean, it comes just after a key acquisition to tie up, especially in that luxury landscape between Tapestry and Capri. And you got to think going forward here for investors that have already seen the acquisitive nature that this formula of Tapestry and really bringing in together several brands under its helm. That many years ago between the Stuart Weitzman and Kate Spade and Coach kind of combination that they were able to make then.

And now adding on even more of those kind of high value, high cost type of names and brands into their portfolio. Or what they're saying about that, they had talked a little bit about that just particularly in the press release, saying that they're establishing a new global powerhouse of luxury and fashion brands that expands their portfolio across consumer segments, geographies, and product categories.

Still, a question lingers, perhaps, of whether or not they overpaid for that acquisition as well. A considerable premium to what the market valuation was for Capri.

JULIE HYMAN: Although Simeon Siegel, who we talked to at BMO Capital Markets, said it's a depressed valuation coming into that offer. So nonetheless, the Tapestry shares have been falling pretty much ever since it announced that deal. So that is something to think about as well. I was just trying to search the conference call for some comments on Capri.

And they did talk about it and talked about the case that it will create significant value for the two companies. Of course, we shall see over time if that is indeed how it works out. But the shares, little change on the back of these numbers.

BRAD SMITH: And just, you know, additionally, the type of consumer that they're going after, too, right now, where you've got more of the engagement with Gen Z and millennials that they're trying to drive forward. They talked about that in the press release. Driving customer engagement across brands, acquiring 6.5 million new customers in North America alone. Roughly half of which were Gen Z and millennials. So particularly interesting what type of customer lifetime value they can get out of that relationship with the cohort as well.