By Mackenzie Tatananni and Sabrina Escobar

Tapestry stock rose sharply Thursday as the owner of Coach, Kate Spade, and Stuart Weitzman announced a fiscal second-quarter earnings beat and raised its fiscal-year outlook.

Shares surged 19% to $87.58 after the fashion holding company reported earnings of $2 a share, topping analysts' expectations for $1.75. The company delivered second-quarter revenue of $2.2 billion, narrowly beating calls for $2.1 billion.

Tapestry said its strong performance in the quarter, representing a 5% revenue increase from the previous year, was driven largely by growth at Coach.

The company boosted its full-year earnings guidance to a range of $4.85 to $4.90 a share, up from a prior range of $4.5o to $4.55. Analysts surveyed by FactSet expected $4.67.

Tapestry said it expects full-year revenue of $6.85 billion, representing growth of around 3%, versus an earlier outlook that called for 1% to 2% growth. The new revenue target topped Wall Street's forecast of $6.76 billion, according to FactSet.

Market expectations were high heading into Tapestry's report, with the stock up about 12% this year compared to the S&P 500's roughly 3% gain. But these results "far exceed expectations," writes Paul Lejuez, an analyst at Citi, in a note Thursday.

"We expect the strong outperformance by the core Coach brand and the big guidance raise to move the stock significantly higher," he added.

Tapestry's strong quarter offers a stark contrast to the weaker one posted by rival Capri Holdings on Wednesday. While Tapestry beat expectations and struck an upbeat tune about the rest of the year, Capri's earnings fell short, and guidance was lackluster. The companies were intending to merge, but the deal got blocked last fall after the Federal Trade Commission successfully sued to block it.

The diverging results indicate that both companies -- which compete for consumer dollars in the mid-range luxury market -- have emerged in vastly different shape from the botched merger. Tapestry is on much surer footing, while Capri still has a lot of work to do to turn business around. The company's management team and investors had hoped that Tapestry's management could do for Michael Kors what they did for Coach -- an option that is now decidedly off the table.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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February 06, 2025 09:51 ET (14:51 GMT)

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