Tapestry runs into hurdles in quest to win back shoppers

Bloomberg

Tapestry Inc., the company formerly known as Coach, is running into big hurdles in its quest to win back shoppers.
Same-store sales at Tapestry’s Kate Spade brand missed analysts’ estimates in the latest quarter, while production delays and other problems at the Stuart Weitzman brand were a drag as well. Same-store sales for the Coach brand, its biggest business, met projections, but the downbeat smaller brands and a full-year profit warning disappointed investors.
The results sent Tapestry shares down as much as 14 percent to $46 in New York, the biggest intraday decline since August. They had climbed 22 percent this year through Monday’s close.
“Revenue is bound to suffer” as Tapestry pulls back on wholesale distribution and reduces flash sales at Kate Spade, said Neil Saunders, an analyst at GlobalData Retail. “Nevertheless, we support the strategic direction and believe that this corrective action is ultimately necessary to strengthen the brand.”
Under Chief Executive Officer Victor Luis, Tapestry has re-engineered itself as a house of three luxury fashion brands: Coach, Kate Spade and Stuart Weitzman. Coach has been pulling back from over-discounting and is benefiting from the sale of more full-price products. Kate Spade has also sacrificed short-term results as it tries to wean customers off of markdowns.
Tapestry is recovering from an extended period of weakness after its leather goods became cheaper and ubiquitous.
The swift rise of competition from rivals such as Michael Kors Holdings Ltd. led to heavy discounting as the handbag brands battled each other over customers.
Tapestry forecast full-year adjusted per-share earnings of $2.57 to $2.60, moving up the lower end of the range from $2.52. Analysts had expected $2.61 on average.
Stuart Weitzman was plagued by issues with production delays and style misses, the company said. In an interview, Luis said the “lack of freshness” in new versions of the label’s over-the-knee boots and sandals stifled sales.
“We’re seeing some bumps in the road in the development and delivery of new product,” he said.