Tapestry adds to the list of luxury fashion companies anticipating a performance hit due to the coronavirus outbreak in China

on Feb 7, 2020
Updated: Mar 11, 2020
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  • Tapestry adds to the list of luxury fashion companies anticipating a performance hit due to the coronavirus outbreak in China.
  • Tapestry reveals its net sales in the second quarter at $1.82 billion on Thursday.
  • Tapestry reveals $1.10 of earnings per share in Q2 versus analysts' estimate of 99 cents.
  • Tapestry announces Liz Fraser as the new CEO of Kate Spade brand on Thursday.

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The recent outbreak of Coronavirus in China has had multiple businesses from across the globe cutting their forecast for fiscal 2020 as regional operations remain sabotaged due to the health emergency. The American multinational luxury fashion holding company, Tapestry, is the latest to join the league with an announcement on Thursday that its sales can take a hit worth $250 million due to the health crisis in China.

While the fashion company also released a relatively upbeat earnings report on Thursday, it was somewhat offset by the weaker outlook that it forecast for the upcoming quarters. The better than expected earnings of the recent quarter, however, were largely attributed to its Coach products seeing a rising demand in North America, specifically in its online unit. In premarket trading, Tapestry was seen trading 2% higher on Thursday.

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Majority Of Tapestry’s Stores In Mainland China Have Been Closed

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Following over 500 virus-driven casualties, the majority of Tapestry’s stores have been closed in mainland China. As per the Tapestry’s CEO, Jide Zeitlin, sales in the second-half can be expected to fall by $200 million to $250 million. In terms of earnings, on the other hand, a cut from 45 cents to 35 cents is expected.

In its guidance for fiscal 2020, Tapestry anticipated making $2.15 to $2.25 of earnings per share. In a previous estimate, Tapestry had highlighted its expected EPS for fiscal 2020 at a higher $2.57.

Tapestry revealed its net sales in the second quarter at $1.82 billion on Thursday that marked an around 1% increase ascribed to the rising demand for the new designs of Coach handbags at a higher price. According to Refinitiv, analysts were expecting the company to make $1.81 billion worth of sales in the recent quarter.

Tapestry Beat Analysts’ Estimate For Earnings Per Share In The Second Quarter

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On the earnings front, analysts were expecting the company to make $99 cents of earnings per share in the second quarter. In its earnings report on Thursday, however, the fashion company beat the analysts’ estimate posting $1.10 of earnings per share in Q2.

Tapestry has also announced Liz Fraser as the new CEO of Kate Spade brand that is on its portfolio. Fraser has previously served as the president of Lafayette 148 that focuses primarily on women’s fashion. The executive switch, as per experts, will be construed as a positive change.

Tapestry’s performance in the stock market in 2019 was reported poor with the company losing over 20% last year. In 2020, however, it has so far gained around 8% in more than a month.

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