Tapestry forecasts weak annual sales amid Kate Spade struggles, shares fall

Aug 13 (Reuters) - Tapestry forecast sluggish ‌growth in ​annual revenue ​on Thursday, overshadowing its better-than-expected quarterly profit, as persistent struggles at Kate Spade raise concerns about its ability to sustain growth beyond ‌Coach.

Shares of the company, which have risen roughly 20% this year, ⁠were down about 8% in premarket trading.

The company has long struggled to revive sales at ‌Kate Spade. The brand named Scottish ‌fashion designer Jonathan Saunders as its creative director last month, as part of a turnaround plan that includes improvements in product design and visual identity.

In ​contrast, its Coach brand has been winning over younger shoppers through its reduced but targeted promotional campaigns that have helped it gain market share. ⁠Newer collections such as Tabby and Belted Ergo shoulder bags have also helped drive growth at Tapestry.

Revenue from ​North America, its biggest region, rose 7% on a constant currency basis, while China jumped 28% and Europe rose 19% compared ​with a year ago.

"The North American consumer ‌remains resilient and constructive, and it's a big part of our business and one of our relative strengths," finance chief Scott ⁠Roe told Reuters.

The company expects earnings per share for the year ending June 2027 to be in the range of $7.80 to $7.90, the midpoint of which is above analysts' estimates ⁠of $7.84 per share, according to data compiled by LSEG.

It also sees first-quarter revenue growth of ​high single digits and profit of about $1.55 per share, beating analysts' estimates of 5.5% growth and $1.49 per share, respectively.

The company's quarterly gross margins expanded 180 basis points to 78.1%, helped by ‌the sequential price hikes it took over the past quarters.

Tapestry's fourth-quarter adjusted profit of $1.32 per share topped estimates of $1.28 per ‌share.

The midpoint of its annual revenue forecast range of $8.4 billion to $8.5 billion came in ⁠slightly below estimates of $8.46 billion.

Quarterly ‌sales rose 8.9% to $1.88 billion ​from a year earlier, in line with analysts' estimates.

(Reporting by Anuja Bharat Mistry and Shania S Thomas in Bengaluru; Editing by ‌Leroy Leo)

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