Tapestry Inc. Q3 fiscal sales increase 7 percent

Coach and Kate Spade parent Tapestry Inc beats fiscal third-quarter earnings and sales estimates and raised its outlook for the rest of its year, which ends in two months. Investors liked what they saw and sent shares of the company up 3.7 percent to $77.54 on Thursday.

“This is a team that has had a bias for action, and you can see that in our results,” said Joanne Crevoiserat, chief executive officer of Tapestry, in an interview. “We delivered a record-breaking quarter. We accelerated our growth on top and bottom line, led by Coach, which helped us raise our outlook for the year in an environment that is very dynamic.”

Sales for the quarter ended March 29 grew by 7 percent to $1.58 billion, better than the $1.53 billion analysts projected. Coach drove that gain, rising 13 percent to $1.29 billion, while Kate Spade fell 13 percent to $244.9 million and the soon-to-be divested Stuart Weitzman sank 18 percent to $46.2 million.

Crevoiserat zeroed in on the company’s ability to bring in fresh faces and pointed to the more than 1.2 million new customers it attracted in North America during the quarter. Two-thirds of those shoppers were Gen Zers and Millennials. “We’ve been very intentional about what I will just characterize as brand building, and everything we do starts with who our target customer is,” she said.

Since before the pandemic, Tapestry has gone from devoting 3 to 4 percent of its sales to marketing, to spending more than 10 percent. At the same time, operating margins have expanded by 400 basis points. “So the business model itself has gotten much more efficient,” she said. Scott Roe, chief operating and chief financial officer, said the company is in a pretty good spot.

China, which has been hit with 145 percent tariffs by U.S. President Donald Trump, accounts for less than 10 percent of production. Vietnam, Cambodia and the Philippines — which are currently subject to a 10 percent tariff — account for about 70 percent of goods. Roe said, “We’re bringing goods in earlier, we’re looking at optimizing across the supply chain and looking to partner with our suppliers where we have scale and we have long standing strategic relationships.”