Tapestry on Tuesday reported that fourth quarter net sales rose 31% year over year (29% in constant currency) to $1.48 billion, driven by its acquisition of Kate Spade as well as organic growth, according to a company press release.
By brand in the quarter: Coach net sales rose 5% (3% in constant currency) to $1.1 billion as comparable sales rose 2%; Kate Spade net sales were $312 million as global comparable sales fell 3%, including a half-point decline from a reduction in online flash sales; and Stuart Weitzman net sales fell to $73 million from $88 million a year ago.
For the full year, Tapestry net sales rose 31% (30% in constant currency) to $5.88 billion, according to a company press release. Net income for the year was $398 million, down nearly 33% from the previous year. Excluding costs related to acquisitions, Tapestry's efficiency plan and last year's tax bill, net income for the year was $759.9 million, an increase over a similarly calculated figure in the previous year.
Tapestry’s acquisition of the Kate Spade label, which the company (still Coach then) took on a year ago for $2.4 billion, is paying off sooner than expected, executives said on a conference call on Tuesday.
The company hasn't just focused on the intricacies of channels and sales. Kate Spade and Coach designs and marketing have both been revamped to appeal to a younger, and higher spending, consumer set. For Coach, the company is working to infuse its existing store network in North America with an elevated experience and doesn't expect to shutter many doors. Executives said they're "feeling good" about its Coach business in North America.
Some of the Kate Spade sales rise in the quarter sprung from nostalgia and tribute after the death of its founder earlier this year, executives also said. But in a move that promises a more sustainable impact, Tapestry is sending the brand through the same paces it previously set for Coach, pulling back from outlet sales and online flash sales and discounts at department stores.
"This effort is now almost complete, and while global comparable sales were down 3%, margins are strengthening and top-line revenue is starting to look more favorable," GlobalData Retail Managing Director Neil Saunders said in comments emailed to Retail Dive. "The brand is now in a better position and should start making a solid top- and bottom-line contribution over the next fiscal year."
Right now Coach appears to be the company's star power, with more muted results from Kate Spade and Stuart Weitzman. The latter has had a problematic run of late, beset by production issues that have hurt sales and could be undermining its overall brand position, Saunders warned.
But all in all, the fashion conglomerate is in "good shape" and poised to have a successful holiday quarter, according to Saunders. With its Kate Spade strategy in place, look for its portfolio to possibly grow further with additional acquisitions, he said.