Market Overview

Tapestry Falls 15% Following Q3 Earnings; Kate Spade In Focus

Tapestry Falls 15% Following Q3 Earnings; Kate Spade In Focus

Shares of Tapestry Inc (NYSE: TPR) fell more than 15 percent Tuesday after the parent company of multiple luxury fashion brands such as Kate Spade, Coach and Stuart Weitzman reported its third-quarter results.

What Happened

Tapestry beat EPS estimates by 4 cents, coming in at 54 cents per share; Sales came in slightly higher at $1.32 billion. The company's FY18 guidance of $2.57-$2.60 implies Q4 EPS of 54 cents - 57 cents, which is below consensus estimates of 61 cents.

Among multiple concerning metrics,, investors are particularly focused on the same-store sales decline at Kate Spade, according to CNBC's Courtney Reagan.

Kate Spade accounts for approximately 25 percent of the entire company and comparable store sales fell 9 percent versus the 7.3 percent Wall Street analysts were expecting. Sales growth at the Stuart Weitzman brand also disappointed, while gross margins fell 62.1 percent a year ago to 56.6 percent due to "some execution issues" that are expected to continue through winter.

On the other hand, the Coach brand "barely" managed to beat expectations as same-store sales grew 3 percent versus expectations of 2.7 percent. Tapestry's earnings beat is attributed to a more favorable tax rate and gross margins disappointed, Reagan said.

Why It's Important

RBC analyst Brian Tunick was quoted by Reagan as saying Tapestry may have faced elevated expectations based on the "strong results" seen at mega-luxury brand LVMH. The analyst was also quoted as saying the decline in Tapestry's stock could be seen as a buying opportunity as the company's brand transformation to date has been "pretty impressive" while demand for its products remains "encouraging."

What's Next

Tapestry's stock staged a brief rebound off its lows, but could end Tuesday's session marking its worst trading day since last August, Reagan said.

At time of publicaton, the stock was down 12.5 percent at $47.

Related Links:

Canaccord Expects Tapestry To Deliver Double-Digit EBIT Growth

Coach Has This Turnaround In The Bag; Analyst Predicts Stock To Outperform


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