TPR Tapestry Inc

By Suzanne Kapner and Kimberly Chin 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 16, 2019).

Tapestry Inc. is showing that creating a house of brands to rival European luxury conglomerates isn't so easy.

The company lowered its earnings guidance for the current fiscal year, mainly due to slower growth at its Kate Spade brand. Following the news, Tapestry shares dropped 22% Thursday to $19.45. The stock has lost 63% of its value over the past year.

Sales at Kate Spade stores open at least a year fell 6% in the three months that ended June 29, and the brand's margins contracted on higher discounting.

"While there have been some green shoots, we clearly need more time to drive an inflection to positive comps, especially given the brand's exposure to the competitive and traffic-challenged North American market, " Tapestry CEO Victor Luis told analysts on Thursday.

Kate Spade's performance was particularly disappointing given that management previously had said it hoped its same-store sales would turn positive in the recently completed period, said Paul Lejuez, a Citi analyst.

Tapestry's other two brands, Coach and the much smaller Stuart Weitzman, performed better. Sales at Coach stores open at least a year rose 2% in the period. The company doesn't disclose same-store sales for Stuart Weitzman, but net sales rose 17% to $85 million.

Overall, Tapestry's sales for the period rose 2% to $1.51 billion. Net income fell to $149 million from $212 million a year ago.

Tapestry expects earnings for its current fiscal year to be roughly flat, and sales to grow in the low-single-digit range.

Tapestry rival Capri Holdings Ltd., which created a conglomerate that includes Michael Kors, Versace and Jimmy Choo, is also struggling. The company's recent performance was dragged down by falling sales at its Michael Kors brand.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Kimberly Chin at kimberly.chin@wsj.com

(END) Dow Jones Newswires

August 16, 2019 02:47 ET (06:47 GMT)

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