Coach and Kate Spade owner Tapestry reported a slower-than-expected loss Thursday, as a strong online business helped offset the impact of closed stores during the coronavirus pandemic.
The company said it will cut spending and shift its focus to digital growth as part of a turnaround plan. It said e-commerce sales had increased by triangular figures over the previous year, as it gained nearly 1 million new customers online in North America in the four years, many of them younger.
During a conference call, management discussed the company’s vision to refresh each of its three brands, including Stuart Weitzman, to carve out a niche audience in a full-fledged accessories market. Each of the market leaders shouted mistakes.
“We put too much focus on the customer we wanted, and not enough on who our customer really is. [and] what we stand for as a brand, “said Todd Kahn, Coach President and CEO of Coach.” We are ready to relaunch the accessible luxury segment by developing our message. ”
Although the company offers no prospect for the coming fiscal year due to the pandemic, it said it expects revenue to be roughly in line with the previous year.
Shares of Tapestry rose more than 8% in premium trading.
Here’s what the company reports compared to what Wall Street expected for the fiscal quarter ended June 27, based on a survey by analysts by Refinitiv:
- Losses per share: 25 cents, adjusted vs. 57 cents, expected
- Revenue: $ 714.8 million vs. $ 663 million, expected
Tapestry reported a net loss of $ 293.8 million, or $ 1.06 per share, compared to a profit of $ 148.9 million, or 51 cents a share, a year ago.
With the exception of special items, the company lost 25 cents per share.
Net sales decreased to $ 714.8 million from $ 1.51 billion a year ago.
Analysts had expected a loss of 57 cents per share, on revenue of $ 663.3 million, based on a Refinitiv survey.
Coach sales fell 53%, while sales at Kate Spade fell 51%, and sales at its Stuart Weitzman brand fell 61% in the quarter.
The company reported hopeful signs, however, that could bode well for its future. It said it was returning to positive year-over-year sales growth in China. It also opened the majority of the stores it operates all over the world.
Gross margins improved in each of the company’s markets, in part, due to fewer markdowns on bags and jewelry.
“I’m sure the next chapter of Tapestry’s growth is for us to write,” said Joanne Crevoiserat, interim CEO of Tapestry, during the conference call, adding that the fourth quarter exceeded the company’s own expectations. “The changing landscape has not changed our priorities, [but] it has been a catalyst to accelerate them. ”
Meanwhile, the company allowed him to speed up with a turnaround plan. It said it will become slimmer, more focused on its e-commerce business and appeal to consumers in new ways to increase sales for Coach, Kate Spade and the Stuart Weitzman. It estimates that it will reduce spending by about $ 300 million, including $ 200 million that will be projected in fiscal 2021.
As one example, Kahn said the Coach brand will have 50% fewer handbags and items for customers to choose from this upcoming holiday season. “This reduction is key to greater productivity and clearer market messages for the consumer,” he said.
Crevoiserat, a former executive of Abercrombie & Fitch, stepped into the role of CEO as the company sought a permanent replacement.
Tapytry’s CEO Jide Zeitlin resigned in mid-July when the board began a probe into his personal behavior. He has been chairman since 2014 and had just taken over the CEO role from Victor Luis in September.
To bolster its finances during the pandemic, Tapestry said it cut operating costs by 20% and made other decisions to reduce business spending. The company ended the fiscal year with $ 1.4 billion in cash and short-term investments, including a $ 700 million revolver.
To read the full press release of revenue over here.
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