What's happening
Shares of Tapestry (TPR -1.60%), the corporate owner of the Coach and Kate Spade brands, were trading down on Thursday on growing concerns about business disruption due to the outbreak of COVID-19.
As of 2 p.m. EST, Tapestry's shares were down about 7.2% from Wednesday's closing price.
So what
There are a couple of reasons why investors in Tapestry and other fashion and luxury companies are having COVID-19-related concerns today.
Image source: Tapestry.
First, the virus is now affecting Tapestry's supply lines beyond Asia. Northern Italy, where brands like Tapestry's Coach, Kate Spade, and Stuart Weitzman source leathers and fabrics and contract with local manufacturers, has been hit especially hard by the virus. And the government of Spain, where many of Tapestry's shoes are made, today advised companies to send workers home if there are signs of infection.
Second, there are growing concerns that the virus could depress retail foot traffic for months to come, longer than previously anticipated. Those concerns are leading department-store buyers to reassess their orders for the coming months. Investors are (rightly) worried that Tapestry's order book is in danger of being cut.
Now what
Tapestry cut its sales and profit forecasts for fiscal 2020 in early February, saying that coronavirus-related effects would reduce its full-year sales by $200 million to $250 million, and its earnings per share by between $0.30 and $0.45.
Now, with more visibility into the scale of the outbreak, it's possible that the company will need to revise those forecasts downward again.
