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Tapestry’s net sales declined 2 per cent on a reported basis to $1.48 billion in the third quarter ended 30 March 2024, the company said Thursday. Shares dipped 3 per cent in pre-market trading. Net income dropped from $187 million the prior year period to $139 million this quarter as the company finances costs related to its pending acquisition of Capri Holdings.
Tapestry slightly lowered its 2024 outlook from revenue of over $6.7 billion to $6.6 billion, which would be in line with the prior year on a reported basis.
Direct-to-consumer declines were offset by growth in wholesale, led by the international market division, for which sales grew 3 per cent. Europe achieved 19 per cent growth; Other Asia grew 15 per cent; and Japan was up 2 per cent. Meanwhile, North America, the company’s largest market, declined 3 per cent in a challenging consumer environment and Greater China decreased 2 per cent.
“Our third-quarter earnings results outperformed expectations, reflecting our unwavering commitment to disciplined brand building and operational excellence,” said CEO Joanne Crevoiserat in a statement. “Moving forward, we are confident in our vision for the future and the significant runway to drive sustainable growth and shareholder value.”
Tapestry is in the midst of a lawsuit with the Federal Trade Commission (FTC), which is attempting to block its acquisition of rival Capri Holdings (owner of Michael Kors, Versace and Jimmy Choo). The FTC claimed that the acquisition would squash handbag competition in the accessible luxury market. Tapestry confirmed it is still working to close the transaction in the calendar year 2024, and that it is “confident in the merits and pro-competitive, pro-consumer nature of this transaction”.
In a court filing on Tuesday, Tapestry responded to the FTC’s block, saying it “makes no sense” and showed a misjudgment of the fashion industry. The company has also asked the FTC to clarify how it defines the accessible luxury market. A judge in New York has set a hearing date for 9 September.
If the deal closes, the acquisition is expected to unlock cost synergies of $200 million within three years, generating cash flow and allowing the business to support debt paydown.
By brand, Coach’s net sales were flat at $1.1 billion, Kate Spade grew 6 per cent to $280.7 million and Stuart Weitzman grew 18 per cent to $56.1 million.
Tapestry said it acquired 1.2 million customers in North America, over half of which were Gen Z and millennials. Digital sales, making up more than a quarter of overall sales, have more than tripled since before the pandemic. Immersive retail experience and new concepts resonated particularly with younger consumer groups.
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