Last we checked in on Tapestry, Inc. in May, the rebranded parent company of Coach, Kate Spade and Stuart Weitzman was experiencing some growing pains. In its third-quarter earnings report, the conglomerate revealed that, specifically, it was Kate Spade and Stuart Weitzman that were struggling, with the former seeing drops in same-store sales and the latter in production and sell-through. (Coach, meanwhile, was doing just fine — comparable sales rose 3 percent.)
But now, on the other side of both its fourth quarter and full-year results, Tapestry has more to celebrate. On Tuesday, the New York-based group announced that its fourth-quarter revenue jumped so much — 31 percent, to be exact — that its shares also rose roughly 3 percent. In a report, Tapestry attributed this spike to its acquisition of Kate Spade, which was finalized in July 2017 following a rumored bidding war with Michael Kors.
To be sure, industry eyes have been on Kate Spade since the brand essentially put itself up for sale: Last November, Deborah Lloyd stepped down as creative director after 10 years in the role, and in January, her replacement — Nicola Glass, formerly Michael Kors's longtime senior vice president of accessories design — took over. But in June, Kate Spade, the person, was found dead in her Park Avenue apartment, and though she left the company in 2007, it's undeniable that her impact was still intimately felt in the brand's design and product. Kate Spade, the company, agreed.
In its fourth quarter, Kate Spade proved to be the company's focal point, but elsewhere within Tapestry, Coach also performed quite well: Fourth-quarter net sales rose 5 percent to $1.10 billion, as compared to $1.05 billion in the year prior. However, Stuart Weitzman is still in the trenches. "As anticipated, fourth-quarter results continued to be negatively impacted by development and delivery delays which pressured sales and margins," said Tapestry CEO Victor Luis in a release. For the full year, though, its sales were "essentially unchanged."
Tapestry is already looking ahead to 2019, especially as it continues to beat brand dilution; at Kate Spade, for instance, that's included intentionally reducing promotional activity and pulling out of department stores, which may explain why its third-quarter earnings were less than stellar. Luis noted that Kate Spade is also looking to China "where the brand is nascent."
In fewer words, this goes to show that as with many acquisitions, things tend to get worse before they get better. But for now, largely thanks to Kate Spade, Tapestry seems to be on the upswing.