Tapestry's (TPR) Q1 Earnings Beat, Decline Year Over Year
Zacks Investment Research | Nov 04, 2019 10:20PM ET
Tapestry, Inc. (NYSE:TPR) came out with its first-quarter fiscal 2020 results, wherein the bottom line came ahead of the Zacks Consensus Estimate but top line missed the same.
The company posted adjusted quarterly earnings of 40 cents a share that beat the Zacks Consensus Estimate of 37 cents. However, the bottom line declined 17% from the year-ago period on account of lower net sales and higher SG&A expenses.
Net sales of this New York-based company came in at $1,357.9 million, down 2% year over year on a reported and 1% on a constant currency basis. Sales increase in Coach brand was offset by declines at Kate Spade and Stuart Weitzman. Net sales also came below the Zacks Consensus Estimate of $1,372.7 million. This was the fourth straight quarter that the company’s top line missed the estimates.
For fiscal 2020, management continues to anticipate revenues increase at a low-single-digit rate with earnings per share expected to be even with the prior year.
Management highlighted that the company’s international business was sturdy than North America business, where it continued to face industry headwinds. It further added that adjusted operating income and earnings per share fared better than its guidance.
Notably, Coach registered eighth straight quarter of comparable store sales (comps) growth led by digital and international channels. Comps were strong across Europe, Japan and Mainland China but soft in Hong Kong. Comps were flat in North America. We note that comps at Kate Spade fell owing to product and merchandising challenges, while sales at Stuart Weitzman were hurt by sluggish wholesale demand and operational challenges.
Consolidated adjusted gross profit came in at $918.6 million, down 2% from the prior-year quarter. However, gross margin contracted 20 basis points to 67.6%. Further, adjusted operating income of $166.5 million fell 10% from the prior-year quarter figure, while operating margin shrunk 110 basis points to 12.3%. We note that adjusted SG&A expenses came in at $752.1 million, reflecting an increase of $2.2 million from the year-ago period. As a percentage of net sales, the same increased 110 basis points to 55.4%.
Shares of Tapestry have fallen 16% compared with the Zacks Investment Research
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