|
|
Link to Download Tapestry’s Q2 Earnings Presentation, Including Brand Highlights
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240208830207/en/
(Photo: Business Wire)
“Moving forward, we have an unwavering commitment to deliver sustainable growth and shareholder value. We will continue to put the consumer at the center of everything we do, building our brands for the future and harnessing our data-driven, customer engagement platform to enhance creativity, speed, and agility. We are confident in our vision and our ability to realize it, with significant runway for long-term growth.”
Throughout the fiscal second quarter, the Company advanced its strategic priorities to:
Build Lasting Customer Relationships
Power Global Growth
Deliver Compelling Omni-Channel Experiences
Fuel Fashion Innovation and Product Excellence
Overview of Fiscal 2024 Second Quarter Financial Results
Balance Sheet and Cash Flow Highlights
Dividend
The Company’s Board of Directors declared a quarterly cash dividend of
In the fiscal year, Tapestry continues to expect to return approximately
Acquisition of Capri Holdings Limited
On
Importantly, this transaction is expected to deliver strong double-digit EPS accretion on an adjusted basis and compelling ROIC. At the same time, the Company remains committed to achieving its stated target of a gross leverage ratio of below 2.5x debt/adjusted EBITDA within 24 months of transaction close through rapid debt paydown given the combined entity’s strong cash flow generation.
Since the prior quarter-end, the Company has made incremental progress towards transaction close:
Non-GAAP Reconciliation
During the second fiscal quarter of 2024, Tapestry recorded certain items that decreased the Company’s pre-tax income by
Please refer to Financial Schedules 3 and 4 included herein for a detailed reconciliation of the Company’s reported GAAP to non-GAAP results.
Financial Outlook
Tapestry now expects the following for Fiscal 2024, which replaces all previous guidance and is provided on a non-GAAP basis:
Please note this outlook assumes the following:
Given the dynamic nature of these and other external factors, financial results could differ materially from the outlook provided.
Financial Outlook - Non-GAAP Adjustments:
The Company is not able to provide a full reconciliation of the non-GAAP financial measures to GAAP presented in this release and on the Company’s conference call because certain material items that impact these measures, such as the timing and exact amount of acquisition, financing, purchase accounting and integration-related charges and Company costs associated with the acquisition of Capri Holdings Limited have not yet occurred and cannot be reasonably estimated at this time. Accordingly, a reconciliation of the Company’s non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort.
Conference Call Details
The Company will host a conference call to review these results at
Upcoming Events
The Company expects to report Fiscal 2024 third quarter results on
To receive notification of future announcements, please register at www.tapestry.com/investors ("Subscribe to E-Mail Alerts").
About
Our global house of brands unites the magic of Coach, kate spade new york and
This information to be made available in this press release may contain forward-looking statements based on management's current expectations. Forward-looking statements include, but are not limited to, the statements under “Financial Outlook,” statements regarding long term performance, statements regarding the Company’s capital deployment plans, including anticipated annual dividend rates and share repurchase plans, and statements that can be identified by the use of forward-looking terminology such as "may," "will," “can,” "should," "expect," “expectation,” “potential,” "intend," "estimate," "continue," "project," "guidance," "forecast," “outlook,” “commit,” "anticipate," “goal,” “leveraging,” “sharpening,” transforming,” “creating,” accelerating,” “enhancing,” “innovation,” “drive,” “targeting,” “assume,” “plan,” “progress,” “confident,” “future,” “uncertain,” “on track,” “achieve,” “strategic,” “growth,” “view,” “vision,” “we can stretch what’s possible,” or comparable terms. Future results may differ materially from management's current expectations, based upon a number of important factors, including risks and uncertainties such as the impact of economic conditions, recession and inflationary measures, the impact of the Covid-19 pandemic, risks associated with operating in international markets and our global sourcing activities, the ability to anticipate consumer preferences and retain the value of our brands, including our ability to execute on our e-commerce and digital strategies, the ability to successfully implement the initiatives under our 2025 growth strategy, the effect of existing and new competition in the marketplace, our ability to control costs, the effect of seasonal and quarterly fluctuations on our sales or operating results; the risk of cybersecurity threats and privacy or data security breaches, our ability to protect against infringement of our trademarks and other proprietary rights, the impact of tax and other legislation, the risks associated with potential changes to international trade agreements and the imposition of additional duties on importing our products, our ability to achieve intended benefits, cost savings and synergies from acquisitions including our proposed acquisition of Capri Holdings Limited (“Capri”), the anticipated impact of the proposed acquisition of Capri on the combined company’s business and future financial and operating results, the anticipated closing date for the proposed acquisition of Capri, the satisfaction of the conditions precedent to consummation of the proposed acquisition of Capri, including the ability to secure regulatory approvals on the terms expected, at all or in a timely manner, the impact of pending and potential future legal proceedings, and the risks associated with climate change and other corporate responsibility issues, etc. In addition, purchases of shares of the Company’s common stock will be made subject to market conditions and at prevailing market prices. Please refer to the Company’s latest Annual Report on Form 10-K and its other filings with the
Schedule 1: Consolidated Statement of Operations
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||
For the Quarter and Six Months Ended |
||||||||||||||
(in millions, except per share data) | ||||||||||||||
(unaudited) | (unaudited) | |||||||||||||
QUARTER ENDED | SIX MONTHS ENDED | |||||||||||||
Net sales |
$ |
2,084.5 |
|
$ |
2,025.4 |
|
$ |
3,597.7 |
|
$ |
3,531.9 |
|||
Cost of sales |
|
591.3 |
|
|
636.1 |
|
|
1,006.8 |
|
|
1,088.0 |
|||
Gross profit |
|
1,493.2 |
|
|
1,389.3 |
|
|
2,590.9 |
|
|
2,443.9 |
|||
Selling, general and administrative expenses |
|
1,045.6 |
|
|
971.1 |
|
|
1,890.1 |
|
|
1,771.4 |
|||
Operating income (loss) |
|
447.6 |
|
|
418.2 |
|
|
700.8 |
|
|
672.5 |
|||
Interest expense, net |
|
49.2 |
|
|
7.9 |
|
|
62.5 |
|
|
15.3 |
|||
Other expense (income) |
|
(4.7 |
) |
|
(6.6 |
) |
|
(3.3 |
) |
|
4.1 |
|||
Income (loss) before provision for income taxes |
|
403.1 |
|
|
416.9 |
|
|
641.6 |
|
|
653.1 |
|||
Provision (benefit) for income taxes |
|
80.8 |
|
|
87.0 |
|
|
124.3 |
|
|
127.9 |
|||
Net income (loss) |
$ |
322.3 |
|
$ |
329.9 |
|
$ |
517.3 |
|
$ |
525.2 |
|||
Net income (loss) per share: | ||||||||||||||
Basic |
$ |
1.41 |
|
$ |
1.38 |
|
$ |
2.26 |
|
$ |
2.19 |
|||
Diluted |
$ |
1.39 |
|
$ |
1.36 |
|
$ |
2.23 |
|
$ |
2.14 |
|||
Shares used in computing net income (loss) per share: | ||||||||||||||
Basic |
|
229.3 |
|
|
239.3 |
|
|
228.7 |
|
|
240.3 |
|||
Diluted |
|
231.7 |
|
|
243.3 |
|
|
232.0 |
|
|
245.0 |
Schedule 2: Detail to
DETAIL TO |
||||||||||||
For the Quarter and Six Months Ended |
||||||||||||
(in millions) | ||||||||||||
(unaudited) | ||||||||||||
QUARTER ENDED | ||||||||||||
% Change vs. FY23 | Constant Currency % Change FY23 | |||||||||||
Coach |
$ |
1,541.9 |
$ |
1,449.7 |
6 |
% |
7 |
% |
||||
|
460.4 |
|
490.3 |
(6 |
)% |
(6 |
)% |
|||||
|
82.2 |
|
85.4 |
(4 |
)% |
(3 |
)% |
|||||
Total Tapestry |
$ |
2,084.5 |
$ |
2,025.4 |
3 |
% |
3 |
% |
||||
SIX MONTHS ENDED | ||||||||||||
% Change vs. FY23 | Constant Currency % Change FY23 | |||||||||||
Coach |
$ |
2,699.3 |
$ |
2,569.0 |
5 |
% |
6 |
% |
||||
|
763.6 |
|
812.2 |
(6 |
)% |
(6 |
)% |
|||||
|
134.8 |
|
150.7 |
(11 |
)% |
(10 |
)% |
|||||
Total Tapestry |
$ |
3,597.7 |
$ |
3,531.9 |
2 |
% |
3 |
% |
Schedules 3 & 4: Consolidated Segment Data and GAAP to Non-GAAP Reconciliation
CONSOLIDATED SEGMENT DATA, AND | |||||||||||||||||||
GAAP TO NON-GAAP RECONCILIATION | |||||||||||||||||||
(in millions, except per share data) | |||||||||||||||||||
(unaudited) | |||||||||||||||||||
For the Quarter Ended |
For the Six Months Ended |
||||||||||||||||||
Items Affecting Comparability | Items Affecting Comparability | ||||||||||||||||||
GAAP Basis (As Reported) |
Acquisition Costs | Non-GAAP Basis (Excluding Items) |
GAAP Basis (As Reported) |
Acquisition Costs | Non-GAAP Basis (Excluding Items) |
||||||||||||||
Gross profit | |||||||||||||||||||
Coach |
|
1,147.5 |
|
|
— |
|
|
1,147.5 |
|
|
2,015.1 |
|
|
— |
|
|
2,015.1 |
|
|
|
294.4 |
|
|
— |
|
|
294.4 |
|
|
493.3 |
|
|
— |
|
|
493.3 |
|
||
|
51.3 |
|
|
— |
|
|
51.3 |
|
|
82.5 |
|
|
— |
|
|
82.5 |
|
||
Gross profit |
$ |
1,493.2 |
|
$ |
— |
|
$ |
1,493.2 |
|
$ |
2,590.9 |
|
$ |
— |
|
$ |
2,590.9 |
|
|
SG&A expenses | |||||||||||||||||||
Coach |
|
619.2 |
|
|
— |
|
|
619.2 |
|
|
1,115.5 |
|
|
— |
|
|
1,115.5 |
|
|
|
222.3 |
|
|
— |
|
|
222.3 |
|
|
394.6 |
|
|
— |
|
|
394.6 |
|
||
|
49.9 |
|
|
— |
|
|
49.9 |
|
|
89.7 |
|
|
— |
|
|
89.7 |
|
||
Corporate |
|
154.2 |
|
|
28.3 |
|
|
125.9 |
|
|
290.3 |
|
|
47.9 |
|
|
242.4 |
|
|
SG&A expenses |
$ |
1,045.6 |
|
$ |
28.3 |
|
$ |
1,017.3 |
|
$ |
1,890.1 |
|
$ |
47.9 |
|
$ |
1,842.2 |
|
|
Operating income (loss) | |||||||||||||||||||
Coach |
|
528.3 |
|
|
— |
|
|
528.3 |
|
|
899.6 |
|
|
— |
|
|
899.6 |
|
|
|
72.1 |
|
|
— |
|
|
72.1 |
|
|
98.7 |
|
|
— |
|
|
98.7 |
|
||
|
1.4 |
|
|
— |
|
|
1.4 |
|
|
(7.2 |
) |
|
— |
|
|
(7.2 |
) |
||
Corporate |
|
(154.2 |
) |
|
(28.3 |
) |
|
(125.9 |
) |
|
(290.3 |
) |
|
(47.9 |
) |
|
(242.4 |
) |
|
Operating income (loss) |
$ |
447.6 |
|
$ |
(28.3 |
) |
|
475.9 |
|
$ |
700.8 |
|
$ |
(47.9 |
) |
|
748.7 |
|
|
Interest expense, net |
|
49.2 |
|
|
44.1 |
|
|
5.1 |
|
|
62.5 |
|
|
50.8 |
|
|
11.7 |
|
|
Provision for income taxes |
|
80.8 |
|
|
(18.0 |
) |
|
98.8 |
|
|
124.3 |
|
|
(23.0 |
) |
|
147.3 |
|
|
Net income (loss) |
$ |
322.3 |
|
$ |
(54.4 |
) |
$ |
376.7 |
|
$ |
517.3 |
|
$ |
(75.7 |
) |
$ |
593.0 |
|
|
Net income (loss) per diluted common share |
$ |
1.39 |
|
$ |
(0.24 |
) |
$ |
1.63 |
|
$ |
2.23 |
|
$ |
(0.33 |
) |
$ |
2.56 |
|
CONSOLIDATED SEGMENT DATA, AND | |||||||
GAAP TO NON-GAAP RECONCILIATION | |||||||
(in millions, except per share data) | |||||||
(unaudited) | |||||||
For the Quarter Ended |
For the Six Months Ended |
||||||
GAAP Basis (As Reported)(1) |
GAAP Basis (As Reported)(1) |
||||||
Gross profit | |||||||
Coach |
|
1,035.3 |
|
|
1,844.2 |
|
|
|
302.1 |
|
|
509.9 |
|
||
|
51.9 |
|
|
89.8 |
|
||
Gross profit |
$ |
1,389.3 |
|
$ |
2,443.9 |
|
|
SG&A expenses | |||||||
Coach |
|
582.1 |
|
|
1,051.8 |
|
|
|
233.1 |
|
|
417.7 |
|
||
|
51.2 |
|
|
94.2 |
|
||
Corporate |
|
104.7 |
|
|
207.7 |
|
|
SG&A expenses |
$ |
971.1 |
|
$ |
1,771.4 |
|
|
Operating income (loss) | |||||||
Coach |
|
453.2 |
|
|
792.4 |
|
|
|
69.0 |
|
|
92.2 |
|
||
|
0.7 |
|
|
(4.4 |
) |
||
Corporate |
|
(104.7 |
) |
|
(207.7 |
) |
|
Operating income (loss) |
$ |
418.2 |
|
$ |
672.5 |
|
|
Provision for income taxes |
|
87.0 |
|
|
127.9 |
|
|
Net income (loss) |
$ |
329.9 |
|
$ |
525.2 |
|
|
Net income (loss) per diluted common share |
$ |
1.36 |
|
$ |
2.14 |
|
|
(1) There were no items affecting comparability in the second quarter and first six months of fiscal year 2023 |
Management utilizes non-GAAP and constant currency measures to conduct and evaluate its business during its regular review of operating results for the periods affected and to make decisions about Company resources and performance. The Company believes presenting these non-GAAP measures, which exclude items that are not comparable from period to period, is useful to investors and others in evaluating the Company’s ongoing operating and financial results in a manner that is consistent with management’s evaluation of business performance and understanding how such results compare with the Company’s historical performance. Additionally, the Company believes presenting these metrics on a constant currency basis will help investors and analysts to understand the effect of significant year-over-year foreign currency exchange rate fluctuations on these performance measures and provide a framework to assess how business is performing and expected to perform excluding these effects.
The Company reports information in accordance with
The Company operates on a global basis and reports financial results in
The segment operating income and supplemental segment SG&A expenses presented in the Consolidated Segment Data, and GAAP to non-GAAP Reconciliation Table above, as well as SG&A expense ratio, and operating margin, are considered non-GAAP measures. These measures have been presented both including and excluding acquisition costs for the second quarter and first six months of fiscal year 2024. In addition, segment Operating Income (loss), Net income (loss), and Net Income (loss) per diluted common share, have been presented both including and excluding acquisition costs for the second quarter and first six months of fiscal year 2024.
There were no items affecting comparability for the second quarter and first six months of fiscal year 2023.
The Company also presents free cash flow, which is a non-GAAP measure, Free cash flow is calculated by taking the “Net cash flows provided by (used in) operating activities” less “Purchases of property and equipment” from the Condensed Consolidated Statement of Cash Flows. The Company believes that free cash flow is an important liquidity measure of the cash that is available after capital expenditures for operational expenses and investment in our business. The Company believes that free cash flow is useful to investors because it measures the Company’s ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet, invest in future growth and return capital to stockholders. Adjusted EBITDA is calculated as Net Income, excluding, Interest expense, Provision for income taxes, Depreciation and amortization, Cloud computing amortization costs, Share-based compensation and Items affecting comparability including Acquisition and Integration costs.
Schedule 5: Condensed Consolidated Balance Sheets
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
At |
|||||
(in millions) | |||||
(unaudited) | (audited) | ||||
ASSETS | |||||
Cash, cash equivalents and short-term investments |
$ |
7,462.3 |
$ |
741.5 |
|
Receivables |
|
245.6 |
|
211.5 |
|
Inventories |
|
824.9 |
|
919.5 |
|
Other current assets |
|
509.7 |
|
491.0 |
|
Total current assets |
|
9,042.5 |
|
2,363.5 |
|
Property and equipment, net |
|
539.2 |
|
564.5 |
|
Operating lease right-of-use assets |
|
1,371.0 |
|
1,378.7 |
|
Other assets |
|
2,862.7 |
|
2,810.1 |
|
Total assets |
$ |
13,815.4 |
$ |
7,116.8 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
Accounts payable |
$ |
462.9 |
$ |
416.9 |
|
Accrued liabilities |
|
654.1 |
|
547.1 |
|
Current portion of operating lease liabilities |
|
305.6 |
|
297.5 |
|
Current debt |
|
25.0 |
|
25.0 |
|
Total current liabilities |
|
1,447.6 |
|
1,286.5 |
|
Long-term debt |
|
7,714.4 |
|
1,635.8 |
|
Long-term operating lease liabilities |
|
1,294.7 |
|
1,333.7 |
|
Other liabilities |
|
698.9 |
|
583.0 |
|
Stockholders' equity |
|
2,659.8 |
|
2,277.8 |
|
Total liabilities and stockholders' equity |
$ |
13,815.4 |
$ |
7,116.8 |
Schedule 6: Condensed Consolidated Statement of Cash Flows
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||
For the Six Months Ended |
|||||||
(in millions) | |||||||
(unaudited) | (unaudited) | ||||||
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES | |||||||
Net income (loss) |
$ |
517.3 |
|
$ |
525.2 |
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization |
|
85.8 |
|
|
88.6 |
|
|
Other non-cash items |
|
121.0 |
|
|
30.1 |
|
|
Changes in operating assets and liabilities |
|
177.7 |
|
|
(181.5 |
) |
|
Net cash provided by (used in) operating activities |
|
901.8 |
|
|
462.4 |
|
|
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES | |||||||
Purchases of property and equipment |
|
(43.7 |
) |
|
(108.8 |
) |
|
Purchases of investments |
|
(611.3 |
) |
|
(4.3 |
) |
|
Other items |
|
— |
|
|
193.7 |
|
|
Net cash provided by (used in) investing activities |
|
(655.0 |
) |
|
80.6 |
|
|
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES | |||||||
Payment of dividends |
|
(160.4 |
) |
|
(144.2 |
) |
|
Repurchase of common stock |
|
— |
|
|
(300.0 |
) |
|
Proceeds from issuance of debt, net of discount |
|
6,089.5 |
|
|
— |
|
|
Other items |
|
(119.9 |
) |
|
(60.5 |
) |
|
Net cash provided by (used in) financing activities |
|
5,809.2 |
|
|
(504.7 |
) |
|
Effect of exchange rate on cash and cash equivalents |
|
51.0 |
|
|
2.1 |
|
|
Net (decrease) increase in cash and cash equivalents |
|
6,107.0 |
|
|
40.4 |
|
|
Cash and cash equivalents at beginning of period |
$ |
726.1 |
|
$ |
789.8 |
|
|
Cash and cash equivalents at end of period |
$ |
6,833.1 |
|
$ |
830.2 |
|
Schedules 7 & 8: Store Count by Brand
STORE COUNT | ||||
At |
||||
(unaudited) | ||||
As of | As of | |||
Directly-Operated Store Count: | Openings | (Closures) | ||
Coach | ||||
330 |
2 |
(1) |
331 |
|
International |
604 |
10 |
(1) |
613 |
204 |
1 |
— |
205 |
|
International |
192 |
3 |
(1) |
194 |
36 |
2 |
— |
38 |
|
International |
61 |
2 |
(2) |
61 |
STORE COUNT | ||||
At |
||||
(unaudited) | ||||
As of | As of | |||
Directly-Operated Store Count: | Openings | (Closures) | ||
Coach | ||||
330 |
2 |
(1) |
331 |
|
International |
609 |
13 |
(9) |
613 |
205 |
1 |
(1) |
205 |
|
International |
192 |
5 |
(3) |
194 |
36 |
2 |
— |
38 |
|
International |
57 |
7 |
(3) |
61 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240208830207/en/
Media:
Chief Communications Officer
212/629-2618
aresnick@tapestry.com
Analysts and Investors:
Global Head of Investor Relations
212/946-7252
ccolone@tapestry.com
212/946-8183
Investor Relations
kmueller@tapestry.com
Source: