Dive Brief:

• Tapestry on Thursday reported that second quarter net sales rose 1% to $1.82 billion, as gross profit reached $1.21 billion, up from $1.2 billion a year ago, and gross margin declined to 66.6% from 66.8%. Net income rose to $299 million from $255 million a year ago, according to a company press release.

• Sales growth was strong at the holidays, but the company has been forced to lower its full-year guidance due to the coronavirus outbreak in China, which CEO Jide Zeitlin said in a statement "is now significantly impacting our business in China, resulting in the closure of the majority of our stores on the Mainland." The company estimates that the outbreak could cost some $200 million to $250 million in the second half of the year,​ but that "the dynamic nature of the situation" could alter that.

• Tapestry on Thursday also announced new leadership at its Kate Spade and Stuart Weitzman brands. Liz Fraser, who has been president of women's fashion label Lafayette 148, will be CEO and brand president of Kate Spade effective March 1. The same day, Giorgio Sarné, now president of Tapestry Asia and president and CEO of Coach Asia, will be promoted to CEO and brand president of Stuart Weitzman, replacing Eraldo Poletto, "who has decided to leave," according to a company press release.

Dive Insight:

After taking over as chief executive from Victor Luis last fall, Zeitlin is wasting little time installing new leadership at the two brands in the Tapestry portfolio that need the most work.

Coach chugged along nicely in the quarter, with net sales rising 2% year over year to $1.27 billion and global comparable sales also up 2%, including some 200 basis points thanks to global e-commerce growth, the company said. But at Kate Spade, where net sales edged up to $430 million from $428 million in the prior year, comps fell 4%, despite the benefit of about 300 basis points from global e-commerce. And Stuart Weitzman net sales fell 7% to $116 million.

Despite all that, the company had expected to maintain its guidance, but the disease outbreak in China has interfered. That led some analysts, Credit Suisse's Michael Binetti, to give the company a break. In a client note, Binetti called Coach's comp rise in a "tough holiday ... encouraging​."

Similarly, MKM Partners Managing Director Roxanne Meyer said in emailed comments that, "In light of the mixed macro backdrop/ holiday results across the sector, we'd view 2Q results for Coach as a favorable outcome." But she said her team sees "a multi-quarter horizon for both a Kate Spade and Stuart Weitzman turn, with new leadership announced at each."

The comp decline at Kate Spade was better than feared, though that was likely thanks to markdowns, she also said. "Stuart Weitzman appears to be a bigger issue than before as operational challenges and heightened exposure to wholesale now exacerbated by product weakness."

MKM analysts also predict an investment in technology coming "in the next few years," in order for Tapestry to catch up in areas like data analytics, which the analysts note is "critical to compete more effectively" despite its knock to the bottom line.