Aug 13 (Reuters) – Tapestry forecast sluggish growth in annual revenue on Thursday, overshadowing its better-than-expected quarterly profit, as persistent struggles at Kate Spade raise concerns about its ability to sustain growth beyond Coach.
Shares of the company, which have risen roughly 20% this year, were down about 8% in premarket trading.
The company has long struggled to revive sales at Kate Spade. The brand named Scottish fashion designer Jonathan Saunders as its creative director last month, as part of a turnaround plan that includes improvements in product design and visual identity.
In contrast, its Coach brand has been winning over younger shoppers through its reduced but targeted promotional campaigns that have helped it gain market share. Newer collections such as Tabby and Belted Ergo shoulder bags have also helped drive growth at Tapestry.
Revenue from North America, its biggest region, rose 7% on a constant currency basis, while China jumped 28% and Europe rose 19% compared with a year ago.
“The North American consumer remains resilient and constructive, and it’s a big part of our business and one of our relative strengths,” finance chief Scott Roe told Reuters.
The company expects earnings per share for the year ending June 2027 to be in the range of $7.80 to $7.90, the midpoint of which is above analysts’ estimates of $7.84 per share, according to data compiled by LSEG.
It also sees first-quarter revenue growth of high single digits and profit of about $1.55 per share, beating analysts’ estimates of 5.5% growth and $1.49 per share, respectively.
The company’s quarterly gross margins expanded 180 basis points to 78.1%, helped by the sequential price hikes it took over the past quarters.
Tapestry’s fourth-quarter adjusted profit of $1.32 per share topped estimates of $1.28 per share.
The midpoint of its annual revenue forecast range of $8.4 billion to $8.5 billion came in slightly below estimates of $8.46 billion.
Quarterly sales rose 8.9% to $1.88 billion from a year earlier, in line with analysts’ estimates.
(Reporting by Anuja Bharat Mistry and Shania S Thomas in Bengaluru; Editing by Leroy Leo)
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