Tapestry stock sell-off extends as quarterly revenue slips

Tapestry (NYSE: TPR), the parent company of Coach, Kate Spade, and Stuart Weitzman, published weaker-than-expected results. Its revenue dropped slightly from $1.62 billion in Q2’22 to $1.61 billion.

Its cost savings measures helped its net profit rise from $188 million to $224 million while the basic EPS rose from 76 cents to 97 cents. For the year, the company’s revenue dropped to $6.66 billion from the previous $6.68 billion.

Tapestry expects that its revenue will grow by about 4% to $6.9 billion while its EPS rose by 7%. This slow growth partially explains why Tapestry has made one of the biggest acquisitions this year.

Last week., Tapestry agreed to buy Capri Holdings, the parent company of Versace, Jimmy Choo, and Michael Kors. Tapestry will spend $8.5 billion on the deal, mostly with borrowed funds. It ended the quarter with $742 million in cash and short-term investments and $1.6 billion in debt. In a statement, the company’s CEO said:

“By bringing together six iconic brands with a heritage in design and craftsmanship, and leveraging our modern consumer engagement platform, we will drive greater innovation, consumer connectivity, and cultural relevance.”

Investors have not loved the Tapestry and Capri Holding’s merger. Tapestry’s stock price has plunged to $34.26, the lowest level since November last year. It extended the sell-off in the pre-market, falling by more than 2%.