Tapestry Inc, the parent company of popular brands Coach and Kate Spade, has reported a smaller-than-expected quarterly loss as it sees a recovery in sales in China and implements cost-cutting measures. This positive news has led to a 7% increase in the company’s shares during premarket trading, surpassing sales estimates.

The rebound in sales in mainland China has been a significant factor contributing to Tapestry’s improved performance. With travel restrictions in place, Chinese consumers have turned to luxury handbags, apparel, and accessories within their own country. This trend has also been observed by other luxury goods companies such as Capri Holdings, LVMH, and Kering, who have all noted an increase in sales in the region. However, major shopping destinations in Europe and America continue to face pressure in terms of demand.

Tapestry currently faces the challenge of recovering from the impact of the COVID-19 pandemic without a permanent CEO. Jide Zeitlin resigned last month due to an investigation into his personal behavior. Despite this setback, the company is taking proactive measures to streamline its business by closing stores, cutting jobs, and reducing costs. It expects to incur charges of approximately $100 million to $115 million in fiscal 2021 as a result of these actions.

In the fourth quarter ended on June 27, Tapestry’s adjusted expenses decreased by almost 28% compared to the previous year. To further reduce costs, the company implemented pay cuts, reduced marketing expenses, and canceled certain product lines for the summer and fall seasons. These efforts have resulted in a smaller-than-predicted quarterly loss, with a loss of 25 cents per share compared to the estimated loss of 57 cents according to analysts.

Despite the challenges posed by the pandemic, Tapestry has seen a significant increase in online sales, with a triple-digit growth rate. However, overall net sales still fell by nearly 53% to $714.8 million. Although this represents a substantial decline, it exceeded analysts’ expectations of $663.4 million.

Tapestry’s ability to rebound in China and implement cost-cutting measures has helped the company navigate the impact of the pandemic. Finding a permanent CEO will be crucial in ensuring future success as the company continues on its path to recovery. Tapestry remains optimistic about its prospects and is focused on adapting to the evolving consumer landscape while staying true to its well-known brands.

Useful Links:
1. Coach
2. Kate Spade