By Sabrina Escobar
Tapestry's fiscal third-quarter earnings barreled past analysts' expectations, but the stock ticked lower after the company missed on sales and trimmed its revenue guidance.
Revenue at the fashion company, which houses several brands including Coach and Kate Spade New York, fell 2% year over year to $1.48 billion -- just shy of consensus estimates for $1.5 billion, according to FactSet. Unfavorable foreign-exchange rates were attributable for about 1.6% of the decline, Tapestry said.
Adjusted earnings were 81 cents a share, topping analysts' estimates for 68 cents a share. This excludes a one-time charge of 21 cents tied to the company's pending acquisition of competitor Capri Holdings. Factoring in those charges, Tapestry's earnings were 60 cents a share.
Tapestry trimmed its revenue forecasts for fiscal 2024. The company now expects revenue of more than $6.6 billion, below previous guidance and analysts' projections for $6.7 billion. The company maintained its guidance for earnings per share to range between $4.20 and $4.25. Analysts had penciled in $4.23 per share.
Shares of Tapestry ticked 3% lower to $37.75 in premarket trading Thursday. The stock has gained 5.9% this year.
Tapestry announced plans to buy Capri, the parent company of Michael Kors, last August for $8.5 billion. The deal is expected to make more than $200 million in cost savings within three years of closing, the company said Thursday, and could grow earnings per share by double digits over the long term on an adjusted basis.
Wall Street has generally favorable views on the merger, with analysts saying it would help Tapestry better compete with other luxury conglomerates, such as LVMH Moët Hennessy Louis Vuitton and Gucci parent Kering.
Regulators have been less positive. The Federal Trade Commission recently sued to block the acquisition, arguing it would curb competition in the market for less expensive luxury handbags.
"The Company is confident in the merits and pro-competitive, pro-consumer nature of this transaction and looks forward to presenting its strong legal arguments in court, working expeditiously to close the transaction in calendar year 2024," Tapestry said.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
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May 09, 2024 08:36 ET (12:36 GMT)
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