Tapestry names new CEO for Kate Spade; cuts guidance on coronavirus outbreak
Coach parent Tapestry reported second-quarter earnings and sales that topped analysts’ expectations but warned of headwinds in Asia, including the coronavirus outbreak in China.
Tapestry also made several C-suite appointments, including the appointment of Liz Fraser as CEO and president of Kate Spade, effective March 1. She will take over control of the struggling brand from Joanne Crevoiserat, Tapestry’s CFO, who has been leading it in on an interim basis since the departure of Anna Bakst in December 2019. Kate Spade’s same-store sales have fallen each quarter since Tapestry acquired it in 2017.
Fraser joins Tapestry from Lafayette 148, a New York-based, vertically integrated, women’s fashion brand where she has been president since 2018. She joined Lafayette from Anne Klein, where she was CEO, and before that, Marc by Marc Jacobs, where she was president
Tapestry reported net income of $299 million, with earnings per share of $1.08, for the quarter ended Dec. 28, compared to net income of $255 million with earnings per share of $0.88 in the prior year period. Analysts had expected earnings of $0.99 per share.
Net sales rose 1% to $1.82 billion, beating the Street estimate of $1.81 billion, compared to $1.80 billion in the prior year.
By brand, Coach continues to drive Tapestry’s performance as it delivered its ninth consecutive quarter of positive comparable store sales growth. Coach’s net sales rose 2% to $1.27 billion; global same-store sales increased 2%. Net sales for Kate Spade totaled $430 million compared to $428 million in the prior year; global same-store sales fell 4%. Net sales for Stuart Weitzman totaled $116 million compared to $124 million last year.
Tapestry said results in the second half of 2020 will be negatively impacted due to the coronavirus outbreak in China.
“At Tapestry, we entered our third fiscal quarter with strong underlying trends, notably at Coach, as sales growth accelerated from the holiday period,” said Tapestry chairman and CEO Jide Zeitlin. “Therefore, we had anticipated maintaining our FY20 guidance despite continuing headwinds in Hong Kong SAR and challenges at Stuart Weitzman. However, the escalating coronavirus outbreak is now significantly impacting our business in China, resulting in the closure of the majority of our stores on the Mainland.”
Tapestry said it expects that its second half results could be negatively impacted by approximately $200 million to $250 million in sales and $0.35-$0.45 in earnings per diluted share, given current trends in China. It warned that if the situation further deteriorates, or the outbreak affects demand outside of the country, the impact could be worse.
“We are confident in our ability to effectively navigate through this period of uncertainty,” said Zeitlin. “We are managing our response to best protect our people, our brands and every aspect of our business. Our primary concern is the health and well-being of our team, their families and their local communities who are dealing with the daily reality of this situation. We believe in the resilience of the Chinese people and our view that China represents a significant opportunity for our brands is unchanged.”
In other Tapestry C-suite appointments, Giorgio Sarné, currently president of Tapestry Asia and president and CEO of Coach Asia, will be promoted to CEO and brand president of Stuart Weitzman. In the new role, Sarné will succeed Eraldo Poletto, who will leave the company March 1.
And Yann Bozec, currently president of Tapestry China and president and CEO of Coach China will be promoted to president of Tapestry Asia Pacific. He will remain as president and CEO of Coach China.