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Disappointing Q2 Results and Guidance Send Tapestry Shares Plunging Thursday Morning

By Daniel Miller – Updated Apr 21, 2019 at 12:16AM

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A rough macroeconomic environment and surprise sales woes at Kate Spade hurt second-quarter results.

What happened

Shares of Tapestry (TPR 1.34%), a portfolio of modern luxury brands that includes Coach, Kate Spade, and Stuart Weitzman, are down 17% as of 11:00 a.m. EST Thursday after the release of disappointing fiscal second-quarter results.

So what

Management noted that volatile macroeconomic and geopolitical factors contributed to the miss on top- and bottom-line analyst estimates, and an intraday 18% decline wiped away brief year-to-date gains.

TPR Chart

TPR data by YCharts.

Net sales totaled $1.80 billion during the second fiscal quarter, a 2% increase in constant currency from the prior year's $1.79 billion but below analysts' calls for $1.86 billion. Adjusted earnings per share checked in at $1.07, flat compared to the prior year's result and below analysts' estimates calling for $1.11 per share. Tapestry's top-line weakness came from a surprise decline in Kate Spade sales, which fell 1% to $428 million compared to the expectations of an 11% increase to $485 million. Coach and Stuart Weitzman posted respective sales gains of 2% to $1.25 billion and 3% to $124 million.

Now what

"During the second quarter, our sales and gross profit rose, successfully anniversarying the strong holiday results of the prior year. That said, this performance fell short of our expectations in the face of an increasingly volatile macroeconomic and geopolitical backdrop," said Victor Luis, chief executive officer of Tapestry, in a press release.

Woman sitting on steps next to luxury handbag.

Image source: Getty Images.

Another factor weighing on Tapestry's stock price today was management's guidance. Due to the weaker-than-expected second quarter as well as the volatile environment, management now predicts full-year 2019 adjusted earnings per share to check in between $2.55 and $2.60, below analysts' estimates expecting $2.78 per share.

While the second-quarter and full-year guidance left investors wanting more, the company will continue to focus on improving store experience, rationalizing wholesale and retail distribution, creating synergies from its Kate Spade acquisition, and boosting Stuart Weitzman revenue growth to try and improve its financial performances.

Check out the latest Tapestry earnings call transcript.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tapestry. The Motley Fool has a disclosure policy.

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