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Delivers Strong Sales, Operating Income and Earnings Per Diluted Share Growth
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“Results were driven by continued growth at Coach, where global comparable store sales rose 4%, led by outperformance in digital, and reflected our compelling offering across categories and channels. Further, we drove leverage to the operating income line through significant gross margin expansion.”
“Kate Spade contributed to our overall performance, as we made continued progress on our integration efforts including the realization of synergies and the execution of strategic initiatives. Most importantly, we were delighted by the very positive editorial and trade reception to Creative Director
“At Stuart Weitzman, trends improved from the prior quarter, though results, as anticipated, continued to be negatively impacted by development and delivery delays which pressured sales and margins. Production levels and shipments have now stabilized, reflecting the investment in talent and processes as well as added manufacturing capacity. As a result, we remain on track to achieve profitable sales growth in the holiday quarter.”
“Across Tapestry, we remain focused on executing our strategic priorities. To this end, during September and October we completed the buybacks of the
Non-GAAP Reconciliation and Recast of Prior Year Results:
During the fiscal first quarter, the Company recorded pre-tax charges associated with Integration and Acquisition activities and the Company’s ERP implementation efforts. Taken together, these items decreased the Company’s first quarter reported net income by approximately
As previously announced, beginning in fiscal 2019, the Company changed its expense reporting to more closely align with the organizational structure and management of the business. Accordingly, certain SG&A expenses that were reported within the Company’s reportable segments in fiscal 2018 are now reflected as Corporate expense. These costs primarily relate to employee costs within shared functional groups. Additionally, and to a lesser extent, certain amounts within the
Overview of First Quarter 2019 Tapestry, Inc. Results:
Please note that comparable fiscal 2018 first quarter performance includes the contribution of
First fiscal quarter results in each of the Company’s reportable segments were as follows:
Coach First Quarter of 2019 Results:
Kate Spade First Quarter of 2019 Results:
Stuart Weitzman First Quarter of 2019 Results:
Mr. Luis added, “Our first quarter performance and progress on our strategic priorities to date, give us confidence in our ability to achieve the goals we’ve set out for fiscal 2019. We continue to expect to deliver strong revenue and operating income growth, while making investments to support our long-term vision and drive a return to both double-digit operating income and earnings per share growth in fiscal 2020. We will continue to harness the power of our multi-brand model, fuel innovation across brands, drive global growth, and advance our digital and data analytics capabilities.”
“As we look forward to holiday and beyond, we are excited about the level of fashion innovation we’ll be introducing across our brands. We remain well positioned to drive positive comparable store sales for Coach driven by a broad and compelling product assortment across price points, categories, usage occasions, channels and geographies augmented by an enhanced shopping experience, whether in stores or online. For Kate, we look forward to continued distribution growth, notably in international markets, and the arrival of Nicola’s first collection in January. And, for Stuart Weitzman, where we’ve made significant progress in creating the infrastructure to support our evolution strategy, we remain on track to return to growth during the holiday season.”
“Overall, we are proud of our continued progress and are very excited about the opportunities ahead for Tapestry and each of our brands,” Mr. Luis concluded.
Fiscal Year 2019 Outlook
The following fiscal 2019 guidance is provided on a non-GAAP basis.
The Company continues to expect revenues for fiscal 2019 to increase at a mid-single-digit rate from fiscal 2018 to
The Company is also maintaining its guidance for the operating income growth rate to exceed the revenue growth rate, reflecting the organic growth of the business, the realization of incremental synergies from the
Net interest expense is still expected to be approximately
Overall, the Company now projects earnings per diluted share in the range of
Fiscal Year 2019 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 charges related to Integration and Acquisition, the costs associated with the Company’s ERP implementation as well as the impact of the tax legislation changes recently enacted in the U.S, have not yet occurred or are out of the Company’s control. Accordingly, a reconciliation of our non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort. Where possible, the Company has identified the estimated impact of the items excluded from its fiscal 2019 guidance.
This fiscal 2019 non-GAAP guidance excludes (1) expected pre-tax charges of approximately
Conference Call Details:
The Company will host a conference call to review these results at
The Company expects to report fiscal 2019 second quarter financial results on
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 “Fiscal Year 2019 Outlook,” as well as statements that can be identified by the use of forward-looking terminology such as "may," "will," “can,” "should," "expect," "intend," "estimate," "continue," "project," "guidance," "forecast," “outlook,” "anticipate," “excited about,” “moving,” “leveraging,” “capitalizing,” “developing,” “drive,” “targeting,” “assume,” “plan,” “build,” “pursue,” “maintain,” “on track,” “well positioned to,” “look forward to,” “to acquire,” “achieve,” “strategic vision,” “growth opportunities” 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 expected economic trends, the ability to anticipate consumer preferences, the ability to control costs and successfully execute our transformation and operational efficiency initiatives and growth strategies and our ability to achieve intended benefits, cost savings and synergies from acquisitions, the risk of cybersecurity threats and privacy or data security breaches, the impact of tax legislation, etc.Please refer to the Company’s latest Annual Report on Form 10-K and its other filings with the
TAPESTRY, INC. |
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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For the Quarters Ended September 29, 2018 and September 30, 2017 |
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(in millions, except per share data) |
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(unaudited) |
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September 29, 2018 |
September 30, 2017 |
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Net sales | $ | 1,381.2 | $ | 1,288.9 | ||||||
Cost of sales | 446.1 | 526.0 | ||||||||
Gross Profit | 935.1 | 762.9 | ||||||||
Selling, general and administrative expenses | 777.4 | 784.7 | ||||||||
Operating income (loss) | 157.7 |
(21.8) |
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Interest expense, net | 13.1 | 20.5 | ||||||||
Income (loss) before provision for income taxes | 144.6 |
(42.3) |
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Provision for income taxes | 22.3 |
(24.6) |
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Net income (loss) | $ | 122.3 | $ |
(17.7) |
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Net income (loss) per share: | ||||||||||
Basic | $ | 0.42 | $ |
(0.06) |
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Diluted | $ | 0.42 | $ |
(0.06) |
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Shares used in computing net income (loss) per share: | ||||||||||
Basic | 288.8 | 283.2 | ||||||||
Diluted | 292.0 | 286.7 | ||||||||
TAPESTRY, INC. |
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GAAP TO NON-GAAP RECONCILIATION |
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For the Quarters Ended September 29, 2018 and September 30, 2017 |
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(in millions, except per share data) |
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(unaudited) |
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September 29, 2018 |
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GAAP Basis (As Reported) |
ERP |
Integration & |
Non-GAAP Basis (Excluding Items) |
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Gross profit | $ | 935.1 | $ | — | $ |
(0.6) |
$ | 935.7 | ||||||||||||
Selling, general and administrative expenses | 777.4 | 4.0 | 18.9 | 754.5 | ||||||||||||||||
Operating income | 157.7 | (4.0) | (19.5) | 181.2 | ||||||||||||||||
Income before provision for income taxes | 144.6 | (4.0) | (19.5) | 168.1 | ||||||||||||||||
Provision for income taxes | 22.3 | (1.0) | (3.2) | 26.5 | ||||||||||||||||
Net income | 122.3 | (3.0) | (16.3) | 141.6 | ||||||||||||||||
Diluted net income per share | 0.42 | (0.01) |
(0.05) |
0.48 | ||||||||||||||||
September 30, 2017 | ||||||||||||||||||||
GAAP Basis (As Reported) |
Operational Efficiency Plan(3) |
Integration & |
Non-GAAP Basis (Excluding Items) |
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Gross profit | $ | 762.9 | $ | — | $ | (88.4) | $ | 851.3 | ||||||||||||
Selling, general and administrative expenses | 784.7 | 3.1 | 99.1 | 682.5 | ||||||||||||||||
Operating (loss) income | (21.8) | (3.1) | (187.5) | 168.8 | ||||||||||||||||
(Loss) income before provision for income taxes | (42.3) | (3.1) | (187.5) | 148.3 | ||||||||||||||||
Provision for income taxes | (24.6) | (1.0) | (52.2) | 28.6 | ||||||||||||||||
Net (loss) income | (17.7) | (2.1) | (135.3) | 119.7 | ||||||||||||||||
Diluted net (loss) income per share | (0.06) | (0.01) | (0.47) | 0.42 | ||||||||||||||||
(1) Amounts as of September 29, 2018 represent technology implementation costs. | ||||||||||||||||||||
(2) Amounts as of September 29, 2018 represent integration and acquisition costs related to contract termination charges, professional fees and limited life |
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Amounts as of September 30, 2017 represent charges primarily attributable to acquisition and integration costs related to the purchase of Kate Spade & |
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- Limited life purchase accounting adjustments |
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- Acquisition costs |
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- Inventory reserves established for the destruction of inventory |
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- Severance and other costs related to contractual payments with certain Kate Spade executives |
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- Organizational costs as a result of integration |
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(3) Amounts as of September 30, 2017 represent technology infrastructure and organizational efficiency costs. | ||||||||||||||||||||
TAPESTRY, INC. |
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GAAP TO NON-GAAP RECONCILIATION - FOR SEGMENT RESULTS |
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For the Quarters Ended September 29, 2018 and September 30, 2017 |
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(in millions) |
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(unaudited) |
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September 29, 2018 | ||||||||||||||||||||||
GAAP |
Coach |
Kate Spade |
Stuart Weitzman |
Corporate |
Non-GAAP |
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COGS | ||||||||||||||||||||||
Integration & Acquisition | (2.0 | ) | 1.4 | — | — | |||||||||||||||||
Gross profit | $ | 935.1 | $ | (2.0 | ) | $ | 1.4 | $ | — | $ | — | $ | 935.7 | |||||||||
SG&A | ||||||||||||||||||||||
Integration & Acquisition | — | 3.4 | 11.5 | 4.0 | ||||||||||||||||||
ERP Implementation | — | — | — | 4.0 | ||||||||||||||||||
SG&A | $ | 777.4 | $ | — | $ | 3.4 | $ | 11.5 | $ | 8.0 | $ | 754.5 | ||||||||||
Operating income | $ | 157.7 | $ | (2.0 | ) | $ | (2.0 | ) | $ | (11.5 | ) | $ | (8.0 | ) | $ | 181.2 | ||||||
September 30, 2017 | ||||||||||||||||||||||
GAAP | Coach | Kate Spade |
Stuart Weitzman |
Corporate | Non-GAAP | |||||||||||||||||
COGS | ||||||||||||||||||||||
Integration & Acquisition | — | (88.4 | ) | — | — | |||||||||||||||||
Gross profit | $ | 762.9 | $ | — | $ | (88.4 | ) | $ | — | $ | — | $ | 851.3 | |||||||||
SG&A | ||||||||||||||||||||||
Integration & Acquisition | — | 67.8 | 0.9 | 30.4 | ||||||||||||||||||
Operational Efficiency Plan | — | — | — | 3.1 | ||||||||||||||||||
SG&A | $ | 784.7 | $ | — | $ | 67.8 | $ | 0.9 | $ |
33.5 |
$ | 682.5 | ||||||||||
Operating (loss) income | $ | (21.8 | ) | $ | — | $ | (156.2 | ) | $ | (0.9 | ) | $ | (33.5 | ) | $ | 168.8 | ||||||
TAPESTRY, INC. |
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SEGMENT INFORMATION |
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For the Quarters Ended September 29, 2018 and September 30, 2017 |
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(in millions) |
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(unaudited) |
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Coach |
Kate Spade | Stuart Weitzman | Corporate | Total | ||||||||||||||||||||||||||||||
Three Months Ended September 29, 2018 | ||||||||||||||||||||||||||||||||||
Net sales | $ | 960.7 | $ | 325.4 | $ | 95.1 | $ | — | $ | 1,381.2 | ||||||||||||||||||||||||
Gross profit | 679.7 | 207.7 | 47.7 | — | 935.1 | |||||||||||||||||||||||||||||
Operating income (loss) | 230.9 | 44.8 | (18.4 | ) | (99.6 | ) | 157.7 | |||||||||||||||||||||||||||
Income (loss) before provision for income taxes | 230.9 | 44.8 | (18.4 | ) | (112.7 | ) | 144.6 | |||||||||||||||||||||||||||
Three Months Ended September 30, 2017 | ||||||||||||||||||||||||||||||||||
Net sales | $ | 923.7 | $ | 268.8 | $ | 96.4 | $ | — | $ | 1,288.9 | ||||||||||||||||||||||||
Gross profit | 632.1 | 74.8 | 56.0 | — | 762.9 | |||||||||||||||||||||||||||||
Operating income (loss) | 208.1 | (123.3 | ) | 8.9 | (115.5 | ) | (21.8 | ) | ||||||||||||||||||||||||||
Income (loss) before provision for income taxes | 208.1 | (123.3 | ) | 8.9 | (136.0 | ) | (42.3 | ) | ||||||||||||||||||||||||||
The Company reports information in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). The Company's management does not, nor does it suggest that investors should, consider non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Further, the non-GAAP measures utilized by the Company may be unique to the Company, as they may be different from non-GAAP measures used by other companies. The financial information presented above, as well as gross margin, SG&A expense ratio, and operating margin, have been presented both including and excluding the effect of certain items related to Integration & Acquisition-Related Costs and ERP Implementation-Related costs for
The Company operates on a global basis and reports financial results in U.S. dollars in accordance with GAAP.Percentage increases/decreases in net sales for the Company and each segment have been presented both including and excluding currency fluctuation effects from translating foreign-denominated sales into U.S. dollars and compared to the same periods in the prior quarter and fiscal year.The Company calculates constant currency revenue results by translating current period revenue in local currency using the prior year period’s currency conversion rate.
Guidance for certain financial information for the fiscal year ending
Management utilizes these 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.
TAPESTRY, INC. |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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At September 29, 2018 and June 30, 2018 |
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(in millions) |
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(unaudited) | (audited) | ||||||||||
September 29, 2018 |
June 30, 2018 |
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ASSETS | |||||||||||
Cash, cash equivalents and short-term investments | $ | 1,063.2 | $ | 1,250.0 | |||||||
Receivables | 283.1 | 314.1 | |||||||||
Inventories | 820.9 | 673.8 | |||||||||
Other current assets | 300.3 | 194.7 | |||||||||
Total current assets | 2,467.5 | 2,432.6 | |||||||||
Property and equipment, net | 888.3 | 885.4 | |||||||||
Other noncurrent assets | 3,347.5 | 3,360.3 | |||||||||
Total assets | $ | 6,703.3 | $ | 6,678.3 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Accounts payable | $ | 292.9 | $ | 264.3 | |||||||
Accrued liabilities | 605.8 | 673.2 | |||||||||
Current debt | 0.7 | 0.7 | |||||||||
Total current liabilities | 899.4 | 938.2 | |||||||||
Long-term debt | 1,600.5 | 1,599.9 | |||||||||
Other liabilities | 893.8 | 895.6 | |||||||||
Stockholders' equity | 3,309.6 | 3,244.6 | |||||||||
Total liabilities and stockholders' equity | $ | 6,703.3 | $ | 6,678.3 | |||||||
TAPESTRY, INC. |
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STORE COUNT |
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At June 30, 2018 and September 29, 2018 |
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(unaudited) |
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As of June 30, 2018
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Acquired | As of | ||||||||||
Directly-Operated Store Count: |
Stores |
Openings |
(Closures) |
September 29, 2018
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Coach |
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North America | 402 | — | 1 | (5) | 398 | |||||||
International | 585 | — | 8 | (9) | 584 | |||||||
Kate Spade |
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North America | 200 | — | 12 | (1) | 211 | |||||||
International | 142 | 6 | 10 | (6) | 152 | |||||||
Stuart Weitzman |
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North America | 68 | — | — | (1) | 67 | |||||||
International | 35 | 6 | 3 | — | 44 | |||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20181030005344/en/
Source:
Tapestry, Inc.
Analysts & Media:
Andrea Shaw Resnick, 212-629-2618
Global Head of Investor Relations and Corporate Communications
or
Christina Colone, 212-946-7252
Vice President, Investor Relations