Tapestry sales in the first quarter of 2025 (ended 28 September 2024) were in line with the same period a year prior, at $1.51 billion. In the context of the luxury slowdown and broader macro challenges, the steady results outperformed expectations, prompting Tapestry to slightly raise its outlook for 2025.
The company — which owns Coach, Kate Spade and Stuart Weitzman — now expects revenue to grow 1 to 2 per cent, reaching over $6.75 billion (previously it had expected sales to grow 1 per cent). Shares jumped almost 5 per cent in early day trading following the earnings announcement.
It’s a small win for Tapestry, which is fresh off a disappointing block from the Federal Trade Commission (FTC) over its plans to acquire rival Capri, owner of Michael Kors, Versace and Jimmy Choo, to build the ultimate American conglomerate. The FTC ruled that the merger would reduce competition in the “accessible luxury” category — though many in the industry have disputed the definition of the category and add that there are a slew of brands that could be considered accessible, not just those owned by Tapestry and Capri. While Tapestry and Capri have filed a notice of appeal, experts say it’s unlikely the judge will overturn the ruling.
“While we await the outcome [of the appeal] it’s important to reiterate that we are in a position of strength and continue to focus on our compelling organic growth plan, building powerful brands and delivering for our consumers,” Tapestry CEO Joanne Crevoiserat said on a call with investors. CFO and COO Scott Roe added that the focus is on the existing business: “We have contingency plans ready pending the outcome of the appeal, and we believe our shares represent a compelling opportunity given the strong organic growth runway of our business, and this would represent our immediate priority should we be unable to move forward with the proposed acquisition of Capri.” He clarified that if the deal does not close, he does not expect any M&A activity in the near term.
Some analysts say the deal blocker is a blessing in disguise for Tapestry. “While Tapestry plans to appeal the injunction preventing the Capri acquisition, we believe it could be a cleaner story without the additional brands and freed-up capital can be used for potential buy-backs (suspended since the deal was announced),” says Dana Telsey, CEO and founder of research and consulting firm Telsey Advisory Group.
In Q1, gross profit grew from £1.1 billion in the prior year period to $1.13 billion, while gross margin improved from 72.5 per cent to 75.3 per cent.
Coach’s sales were up 2 per cent thanks to the continued success of the Tabby and Brooklyn bags, beating consensus — analysts had predicted they would remain flat. Stuart Weitzman (which makes up a very small portion of the business) returned to growth, up 2 per cent as well.
Improving Kate Spade remains a strategic priority for Tapestry. Sales at the brand — whose new CEO Eva Erdmann started last month — dropped 6 per cent on a constant basis, but Crevoiserat highlighted that gross margins grew. “While results for Kate Spade met our expectations in the quarter, we’re not satisfied with the performance and we’re sharpening our roadmap for long-term growth,” she said.
Sales in North America, which represents the majority of the total, fell 1 per cent year-on-year (partly due to a planned reduction in wholesale, which has allowed profits and operating margins to increase). Tapestry said it acquired 1.4 million new customers in North America during the quarter, half of which were Gen Zs and millennials.
Europe was the standout region in Q1, with sales up 27 per cent thanks to strong customer acquisition among local Gen Zs, followed by 10 per cent growth in Other Asia (which includes Malaysia, Australia, New Zealand, South Korea and Singapore among others). Sales in Greater China declined 5 per cent. The company is planning to increase top-of-funnel marketing investments in the region, based on the success of its campaign of short films featuring Elle Fanning, Charles Melton and more. Japan was down 4 per cent.
By the end of fiscal 2025, Tapestry expects revenue to remain flat in North America and Greater China, to grow by the high teens in Europe and mid-single digits in Other Asia, and to decline by low-single digits in Japan.
Crevoiserat concluded the call with three messages: “One, we’re operating from a position of strength, which is reflected in our first quarter beat and raise. Two, Coach is strong and has momentum; our brand-building efforts and platform capabilities are working. And three, we are focused on our existing business and have competitive advantages that provide us with flexibility to accelerate our organic growth and drive significant value creation. I’m confident in our future.”
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