Federal Trade Commission Faces Dispute with Tapestry Inc. Over Capri Holdings Acquisition
As Tapestry Inc. continues to be involved with an investigation by the Federal Trade Commission over the company’s proposed purchase of Capri Holdings, it is beginning to see positive financial results in some areas. The acquisition, an $8.5 billion deal, would see the mother company of Coach, Kate Spade, and Stuart Weitzman increase the strength of their conglomerate. However, in Q4 of this fiscal year, they outperformed Wall Street predictions, hinting at the potential benefits of new acquisitions.
The organization’s net income fell by 28.9% to $159.3 million, down from $224.1 million the previous year. Despite the fall in net income, adjusted earnings were higher than reported at 92 cents per share, compared to analysts’ predictions of 88 cents per share, as calculated by Yahoo Finance.
The success of Tapestry’s results led investors to trade Tapestry’s stocks 5.4% higher to $40.01 in Thursday’s premarket trading.
While overall revenue decreased by 2% to $1.59 billion in the quarter ending June 29, this figure still surpassed analysts’ forecasted revenue of $1.57 billion. Coach continued its steady performance, whereas the other brands experienced a drop in sales. Tapestry’s coach sales were consistent at $1.3 billion; however, Kate Spade fell by 6% to $290.1 million and Stuart Weitzman experienced a 19% decline to $50.6 million.
Tapestry’s CEO, Joanne Crevoiserat, said in regard to this quarter’s results, “Despite a dynamic backdrop, we finished a successful year. We are confident in our bold vision for the future and our commitment to driving growth and shareholder value.”
Part of Tapestry’s reasoning behind the potential Capri deal, which could bring Michael Kors, Versace, and Jimmy Choo on board, is to expand their international operations. Currently, however, Capri’s business is struggling, indicating a need to solidify their position before expanding further.
At present, Tapestry’s business is largely focused on Coach and the North American market. During Q4, North America experienced a 1% decrease in sales to $1 billion, Greater China witnessed a 13% decline to $232.4 million, and sales in Japan fell by 9% to $127.4 million. However, these decreases were somewhat counterbalanced by a 26% increase in sales in Europe, reaching $92.3 million.
Over the entirety of the past fiscal year, Tapestry’s sales remained constant at $6.7 billion. A 3% rise in Coach business offset declines that other brands experienced. The company’s inventories at the end of the fourth fiscal quarter were 10% lower than the previous year. Tapestry attributes this decrease to strong inventory control and a shift in receipt timing into the next quarter.
Looking forward, Tapestry predicts sales to remain around $6.7 billion for the next year, with earnings per share of between $4.45 to $4.50, signifying a mid-single digit growth.