Markets News

UPDATE 3-Tapestry sees falling store traffic pressuring sales for rest of 2020

(Adds details on forecast from conference call, updates shares)

Aug 13 (Reuters) - Coach handbag maker Tapestry Inc on Thursday forecast full-year revenue below Wall Street expectations, saying falling store traffic would continue to pressure sales in the coming months despite a surge in online shopping.

The downbeat outlook took the shine off a smaller-than-expected fourth quarter loss which had sent the company’s stock up as much as 8% in premarket trading. Its shares were last down about 2%.

The New-York fashion house said it expects sales for the fiscal year ending June to be roughly flat from the prior year, with growth only expected in the second half as demand for high-end handbags, apparel and accessories weak due to the COVID-19 health crisis.

Analysts were expecting a 6.4% increase in sales in fiscal 2021, according to IBES data from Refinitiv.

Still, the company, which also owns the Kate Spade and Stuart Weitzman brands, expects profits to return to growth this fiscal year through store closures, lower promotions and pay cuts.

“Stores are not marketing exercises, and they will be held to higher profitability standards globally,” said Todd Kahn, Coach’s brand president.

“This may result in store closures over our planning horizon if our profitability requirements through productivity increases or significant rent reductions are not met.”

Tapestry estimates about $200 million of savings in fiscal 2021.

A recovery in sales in mainland China and a series of cost cuts helped Tapestry post an adjusted loss of 25 cents per share for the fourth quarter ended June 27, smaller than analysts’ estimates of a loss of 57 cents.

Tapestry’s net sales fell nearly 53% to $714.8 million, but beat analysts’ average estimate of $663.4 million.

The company is still in search of a permanent chief executive officer, after Jide Zeitlin resigned suddenly last month amid an investigation into his personal behavior. (Reporting by Uday Sampath in Bengaluru; Editing by Maju Samuel)