The US fashion group Tapestry Inc. had to accept a drop in sales in the second quarter of the 2022/23 financial year. Nevertheless, the parent company of the Coach, Kate Spade and Stuart Weitzman brands is now more optimistic about the second half of the year: On Thursday, the company increased its forecasts.
Group sales for the October-November period were $2.03 billion (EUR 1.88 billion), down 5 percent (-2 percent at constant currency) from the prior-year quarter. The company was particularly troubled by a currency-adjusted sales decline of 20 percent in China as a result of the temporarily tightened protective measures against the Covid 19 pandemic.
Global sales of the main brand Coach shrank by five percent (currency-adjusted -1 percent) to 1.45 billion US dollars in the past quarter, the shoe manufacturer Stuart Weitzman even had to decline by 26 percent (currency-adjusted -24 percent) to 85.4 million accept US dollars. The Kate Spade label’s sales were $490.3 million, down two percent. Adjusted for exchange rate changes, however, it remained almost constant.
Although gross margin was slightly higher than in the prior-year quarter, operating income fell 9.6 percent to $418.2 million due to increased selling expenses. The bottom line, however, was a higher quarterly surplus: Thanks to positive special financial effects, net profit rose by 3.8 percent to 329.9 million US dollars (306.3 million euros), thereby exceeding market expectations.
In view of the current development, the management felt compelled to raise its forecasts for the entire financial year. It now expects sales in the $6.6 billion range. This would mean that revenues would just fall short of the previous year’s level, but would increase by around two to three percent after currency adjustments. Diluted earnings per share target was raised to $3.70-$3.75 from $3.60-$3.70.