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Tapestry Cuts Revenue and Profit Forecast on Coronavirus Outbreak

By Rich Duprey - Feb 6, 2020 at 10:52AM

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Says results may be even worse if the outbreak isn't contained.

Coach handbag owner Tapestry (TPR 0.54%) reported fiscal 2020 second quarter results this morning that showed the coronavirus outbreak is causing it to cut its sales and profit outlook for the year. More ominously, it said if the healthcare crisis was not brought under control its results could get materially worse.

The leather goods and fashion accessories company expects its second half results to see sales reduced by $200 million to $250 million while earnings could drop between $0.35 and $0.45 per share. Chairman and CEO Jide Zeitlin said in a statement, "If the situation further deteriorates, or the outbreak affects demand outside of the country, this impact could be worse."

Asian woman wearing surgical mask

Image source: Getty Images.

A dark cloud

Like many businesses in China, Tapestry has been forced to close the majority of its stores on mainland China because of the outbreak. The country just ordered the entire casino industry in Macau to close for 15 days as it tries to gain control of the virus.

The sales and profit warning ended up overshadowing what was an otherwise positive earnings report that saw Tapestry beat analyst expectations for revenue and earnings. 

Net sales rose to $1.82 billion in the second quarter from $1.8 billion a year ago, edging out Wall Street's forecast of $1.81 billion, while earnings came in at $1.10 per share, handily beating analyst predictions of $0.99 per share.

Zeitlin was also quoted as saying Tapestry's strong financial position will help it get through the current situation, one that doesn't change its "view that China represents a significant opportunity for our brands."

 

Rich Duprey 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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