Tapestry revenue miss attributed to China COVID lockdowns

Yahoo Finance Live anchors discuss fourth-quarter earnings for Tapestry.

Video transcript

JULIE HYMAN: And we're fixing it.

BRIAN SOZZI: Let's stay on retail here. We're going to go to Tapestry, out with a beat on earnings in its latest quarter. However, missing revenue estimates as the luxury retailer saw revenue decline in greater China due to COVID-related disruptions. Of course, it's the brand that owns Coach, Kate Spade, and Stuart Weitzman. Of decent quarter.

I mean, you had Coach sales up 2% year over year, Kate Spade up 1%. That Stuart Weitzman continues to be a problem area, I would argue, for this company-- sales down 15%. I'm not so sure why. I mean, the stores look beautiful. The product is beautiful. It continues to be a little pricey. Pricey?

JULIE HYMAN: Maybe that's the problem. I don't know. But all of their brands are relatively pricey.

BRIAN SOZZI: Yeah, and also raising the dividend here. Look, the quarter from Tapestry checked a lot of boxes. Margins were OK. That held up pretty well. If anything, like we mentioned in the intro, China getting impacted because of the COVID lockdowns. But all in all, in an environment, a very promotional environment for retail, Tapestry was OK.

JULIE HYMAN: Well, speaking of a promotional environment, the adjusted gross margin in the quarter, 71.7%--

BRIAN SOZZI: Huge.

JULIE HYMAN: --which is ahead of estimates.

BRIAN SOZZI: Considering inflation, promotions, this company is driving over 70% margin. I mean, that is huge.

JULIE HYMAN: It's pretty incredible. Inventory did rise 35% year over year. And we've been watching that trend continue of these big inventory builds at retailers. One more thing, though, that is not very positive for tapestry is the full year forecast. Even with that big gross margin number, even with the beat on earnings per share in the last quarter, the full year earnings per share forecast is below estimates. $3.80 to 3.90, 3.95 is what analysts had been looking for. So, interesting here that they seem to be performing on the bottom line, but that doesn't feed through to the full year for some reason.

BRIAN SOZZI: Yeah, I think that's more a function of Tapestry CEO, Joanne Crevoiserat, who, I think, wanted to come out here with a realistic set of financial numbers that she can come out. But she has gained a lot of street cred on Wall Street. She's been consistently beating earnings estimates, driving a major turnaround with this brand, really data driven, not putting terrible-looking products in these Coach-- in Kate Spade stores, doing things right.

So I wouldn't be surprised if some of these reports come in better than expected, barring a massive economic slowdown. Friend of the show Simeon Siegel, I guess, catching a little bit of your vibe, Julie, reiterating market perform quickly on Tapestry, noting the quarter was just relatively in-line.

JULIE HYMAN: Yeah, and I'm looking at some of the headlines out from the conference call, too. The company says that in the first quarter, it will see a 15% revenue decline in greater China. So speaking to what you were talking about, that even as there is some opening there going on, there's still some constrained spending. We still do see shutdowns in various areas. So that could be--

BRIAN SOZZI: Yeah, I'm trying to also figure out the readthrough for [INAUDIBLE] Macy's. So we had the bad-- really shockingly bad quarter from Macy's. Coach was good. They, of course, sell into Macy's stores. It's tough. It's tough. It was a tough quarter in apparel. Target called it out, too. It's-- you know? Unclear what Macy's will report, but the stock was under pressure here in the premarket.

JULIE HYMAN: Yeah, and you referred earlier to people coming back out again and buying clothing. That really does seem to be slowing down, though, as more of-- they bought the clothing. Now they're doing innovations.

BRIAN SOZZI: I don't need anymore jeans. I don't need anymore. I'm still cutting stuff out.

JULIE HYMAN: Have you gotten your suit yet, your new suit yet?

BRIAN SOZZI: Oh, don't even go there. Oh.

JULIE HYMAN: Sorry. I'm just--

BRIAN SOZZI: I'm four weeks in, in getting a suit from Suit Supply. I mean, just the process is ridiculous.

JULIE HYMAN: All right, well, we'll get to that another time.