Tapestry, Inc. Faces Revenue Challenges Despite Earnings Beat

Key Points

• Tapestry, Inc. (TPR) exceeded Q3 earnings expectations with an EPS of $0.81, but missed revenue targets leading to a stock price decline.
• The company revised its FY24 revenue forecast downwards from about $6.7 billion to over $6.6 billion amid weak demand and high inflation.
• Tapestry's proposed acquisition of Capri faces legal challenges from the FTC, adding to the company's current fiscal pressures.

In this news

Despite surpassing earnings expectations, Tapestry, Inc. (TPR) experienced a decline in its stock value following a shortfall in sales targets and a downward revision of its revenue forecast for fiscal year 2024. In the third quarter, the company reported a 2% decrease in revenue year-over-year, totaling $1.48 billion, which fell short of the anticipated $1.5 billion. This decline was partly attributed to unfavorable foreign exchange rates. The adjusted earnings per share (EPS) stood at $0.81, outperforming the consensus estimate of $0.67, yet this did not prevent the stock from dropping by 4% in early trading.

Tapestry, which owns renowned brands such as Coach and Kate Spade New York, also revised its full-year revenue outlook from approximately $6.7 billion to over $6.6 billion. This adjustment comes amid challenges including weak demand for handbags and accessories, exacerbated by high inflation rates. Furthermore, the company's proposed $8.5 billion acquisition of Michael Kors owner Capri is facing legal hurdles, as the U.S. Federal Trade Commission has initiated a lawsuit to block the deal, citing competition concerns.

Looking ahead, Tapestry's management has provided a full-year EPS guidance range of $4.20 to $4.25. Despite the current fiscal challenges and market reactions, the company holds a strong cash position with $7.42 billion in cash and equivalents as of March 30. The future for Tapestry hinges on its ability to navigate through the inflationary pressures and regulatory challenges, while striving to meet its revised financial targets.