Shares in luxury fashion group Tapestry surged today after the owner of Coach and Kate Spade announced $1bn ($768m) worth of share buybacks.
The US holding company beat analysts’ profit expectations when it posted third-quarter results today. Gross profit rose to $916m for the quarter ended 30 March, compared to $908m a year earlier.
Tapestry’s move to purchase $1bn of its own shares comes after a sustained fall in the group’s value since the start of the year, with the share price having fallen 11 per cent since January.
Victor Luis, chief executive at Tapestry, which also owns Stuart Weitzman, said: “Through this program we will optimise our capital deployment and enhance shareholder return, while maintaining our financial and strategic flexibility.”
The firm’s shares rose eight per cent today to $33.10, after opening $4 higher on the back of the share repurchase news. At one point they climbed 18 per cent before falling back.
Tapestry’s brand Kate Spade has suffered under a general retail slump in recent months, with the Christmas period seeing particularly poor sales.
Tapestry’s results showed an improvement at Kate Spade – sales rose four per cent on a reported basis to reach $281m in the third quarter.
Sales at Coach, Tapestry’s other main brand, fell slightly to $965m in the third quarter from $969m a year earlier. Tapestry said this represented an increase of one per cent on a constant currency basis.
Luis said: “We are pleased with our third quarter performance, highlighted by increases in sales and gross margin on a constant currency basis in each of our three brands.”