Tapestry forecasts muted annual sales as Kate Spade struggles; shares tumble

By Anuja Bharat Mistry

Aug 13 (Reuters) - ‌Tapestry forecast sluggish ​annual revenue ​growth on Thursday, overshadowing its better-than-expected quarterly profit, highlighting the persistent weakness at Kate Spade and cautious spending in North America.

Shares of the company, which ‌have risen roughly 20% this year, fell as much as 16.9% to ⁠a more than six-month low of $127.78.

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.

Sales at the brand in the quarter fell ​7% on a constant currency basis, while those at Coach rose 14% from a year ago.

"Investors would like to see a faster turnaround at Kate Spade to bolster ⁠the financials in the near term and also show that Tapestry is a company with multiple levers for growth," GlobalData ​Managing Director Neil Saunders said.

Meanwhile, Coach 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.

With Kate Spade struggling, investors are more focused on Coach and are a little disappointed with ⁠the forecasts, Saunders said.

Tapestry's North America revenue rose 7% on a constant-currency basis, compared with 8% growth a year earlier and about 20% in the prior quarter, reflecting a broader slowdown in spending ⁠amid growing macroeconomic uncertainty.

Revenue from China jumped 28% and Europe rose 19% compared with a year ago.

Tapestry ​executives said on a post-earnings call that they will continue investing in Coach stores and marketing to drive customer acquisition.

The company forecast annual revenue in the range of $8.4 billion to $8.5 billion, with the midpoint ‌slightly below estimates of $8.46 billion, according to data compiled by LSEG.

The company expects earnings per share for the year ending June 2027 to ‌be in the range of $7.80 to $7.90, with the midpoint above analysts' estimates of $7.84 per share.

Tapestry's fourth-quarter ⁠adjusted profit of $1.32 per share topped estimates ‌of $1.28 per share.

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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