Tapestry's Luxury Brands Struggle as FTC Blocks Capri Acquisition
Tapestry, the parent company of Coach, Kate Spade, and Stuart Weitzman, has faced a challenging quarter with sales declines for its luxury brands. The Federal Trade Commission (FTC) has also intervened, filing a lawsuit to block Tapestry's proposed acquisition of Capri Holdings.
Tapestry's unaudited Q3 net sales were $1.48 billion, a 2% decrease year over year. Despite this, earnings beat expectations for the quarter. However, sales for Coach, Tapestry's largest brand, remained flat. Kate Spade and Stuart Weitzman saw significant declines, with Kate Spade dropping 6% and Stuart Weitzman falling 18%.
The downward trend for these brands continued into the second quarter, with both experiencing low double-digit declines in the fourth quarter of 2023. The FTC's lawsuit in April aims to prevent Tapestry's acquisition of Capri Holdings, arguing it would eliminate direct competition and give Tapestry a dominant share of the accessible luxury handbag market. Tapestry's CEO Joanne Crevoiserat acknowledged the challenge and remains committed to closing the transaction in 2024. If successful, the merger would create the fourth largest luxury house in the world.
Tapestry's sales have been impacted by declines in its luxury brands, with Kate Spade and Stuart Weitzman struggling. The FTC's lawsuit adds complexity to Tapestry's proposed acquisition of Capri Holdings. Despite these challenges, Tapestry has revised its 2024 outlook to project revenue of 'over $6.6 billion', with growth of approximately 1% on a constant currency basis.
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