LOS ANGELES • Tapestry, formerly Coach, has stitched up better results while venerable French label Lanvin is trying to mend its seams that are unravelling.
Tapestry reported a higher than expected first-quarter profit on lower costs and a smaller tax bill, with the handbag maker saying that savings from its Kate Spade acquisition would be more than double its previous forecast.
Tapestry bought Kate Spade in May to tap millennials who are drawn to the company's quirky satchels and colourful tote bags.
The deal also turned Coach into a multi-brand fashion house, a strategy that European counterparts such as Louis Vuitton have built their businesses on.
Shares of the company, which also houses shoemaker Stuart Weitzman, were up 1.2 per cent at US$41.91 (S$57) on Tuesday.
The New York-based company expects to achieve synergies of about US$100 million to US$115 million in fiscal year 2019, compared with its previous forecast of US$50 million. The increased cost savings forecast is a result of better terms with vendors on raw materials and shifting Kate Spade production to lower-cost countries, chief executive Victor Luis said.
Some analysts said the results showed that the company's recovery was on track after it rapidly pulled back inventory at department stores as part of a strategy to limit discounting and regain the brand's prestige.
"We believe that the Coach brand turnaround continues and, coupled with the Kate Spade acquisition, will deliver strong earnings growth," analyst Jamie Merriman from brokerage firm Bernstein said.
Overall sales, however, missed estimates due to a surprise drop in same-store sales in its legacy Coach unit, partly because of supply disruptions due to hurricanes in the United States and the shift of a key Chinese festival to the next quarter.
Same-store sales at the Coach business fell 2 per cent, while analysts had expected a 2 per cent rise, according to research firm Consensus Metrix.
Kate Spade's comparable sales also fell 9 per cent as it reduced online flash sales and tried to sell more full-price items.
This resulted in a higher-than-expected build-up in inventory levels for the brand ahead of the holiday quarter, Mr Luis said.
Still, he was upbeat about the situation. "We have returned to growth thus far in the second quarter and are well positioned for holiday."
Meanwhile, troubled French fashion house Lanvin is to be relaunched before the end of the year, with plans to expand into accessories and other luxury goods, the label said on Tuesday.
The oldest Paris fashion house has been in turmoil since the shock sacking of popular designer Alber Elbaz two years ago.
It said its owner, Taiwanese media magnate Wang Shaw-lan, will fund the turnaround with a fresh cash injection.
The news comes amid renewed speculation about the future of the label, which sank into the red to the tune of €18.3 million (S$28.9 million) last year, its first loss for a decade.
But its new designer Olivier Lapidus - who replaced Bouchra Jarrar in July after only 10 months at the helm - said he was helping to prepare a major shift for the brand, which was founded in 1889.
"Madam Wang very much believes in the label," said Lapidus, who had only a month to put together his first women's collection for Paris fashion week in September.
He said he wanted to revive the label's line of evening and wedding dresses without rejoining the official ranks of the Paris haute couture shows, and expand into luxury lifestyle products and decoration, while also beefing up its accessory lines.
"We are not at all worried about paying the bills," its finance chief, Mr Nicolas Druz, said.
"The company has not a penny of debt. Our major shareholder has decided to put her hand in her pocket to help relaunch the brand," he added.