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Significant Actions Underway to Mitigate the Impact of Covid-19
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“No one is immune to the effects of this one hundred year storm. We are taking aggressive actions to assure that Tapestry emerges a strong company when conditions normalize. We have powerful brands with deep consumer connections and a long history of successfully navigating global challenges and macroeconomic shocks. In addition, we have a strong balance sheet, we benefit from a multi-channel international distribution model with only modest exposure to wholesale, and a diversified supply chain.”
“We are building on our strengths and moving swiftly to adapt to the current environment with a focus on preserving liquidity and enhancing financial flexibility. We are accelerating key elements of the transformational work we began prior to the crisis, notably driving outsized growth in digital and creating a more streamlined and data-driven organization.”
Distribution Network
During the quarter, 90% of Tapestry’s stores were either closed or operating on shortened hours. We have seen a degree of normalcy return in certain areas first impacted, including Mainland China and
Supply Chain
Tapestry’s supply chain continued to operate effectively over the third quarter given its globally diversified manufacturing and sourcing base, with relatively limited exposure to
Mitigating Actions
As previously announced, the Company moved quickly to mitigate the impact of Covid-19, reinforcing its liquidity and financial flexibility. Tapestry has also accelerated its transformational work to position the Company for recovery and long-term, profitable growth:
In addition, the Company is taking additional actions to further streamline its organization, including reductions in its corporate and retail workforce. In aggregate, the Company expects to incur pre-tax charges associated with these actions of approximately
Outlook
“The impact of the Covid-19 pandemic transcends near-term results. Consumer behaviors are changing and secular trends are accelerating. In this environment, we are planning conservatively while acting decisively to transform the way we operate and engage with our customers. The saliency of our brands plus the strong financial position of our company will enable us to successfully manage through this crisis, as we become a more consumer-centric, data-driven, and agile organization,"
Overview of Third Quarter 2020
The following results include the impact of the coronavirus. Please note the Company is not providing comparable store sales figures, as the Company believes this will not be a valuable measure given the current business environment and number of store closures during the quarter.
Fiscal third quarter results by brand were as follows:
Coach Third Quarter 2020 Results
Kate Spade Third Quarter 2020 Results
Stuart Weitzman Third Quarter 2020 Results
Non-GAAP Reconciliation
In the third quarter of fiscal 2020, the Company recorded certain items that increased its pre-tax loss by
Impairments:
In the third quarter of fiscal 2020, the Company recorded
In addition, the Company recorded
Fiscal Year 2020 Outlook
Given the dynamic nature of the Covid-19 crisis and lack of visibility, the potential financial impact to our business cannot be accurately projected. Therefore, the Company is not providing guidance for its fiscal fourth quarter and full year 2020.
Conference Call Details
The Company will host a conference call to review these results at
Upcoming Events
The Company expects to report fiscal 2020 fourth quarter and full year results on
The Company intends to host an analyst and investor day at its headquarters in
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 “Outlook” and “Fiscal Year 2020 Outlook,” statements regarding the potential impact of the Covid-19 pandemic and success of mitigating actions, the Company’s multi-year growth agenda and 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,” “roadmap,” "anticipate," “excited,” “moving,” “leveraging,” “capitalizing,” “developing,” “drive,” “targeting,” “assume,” “plan,” “build,” “pursue,” “maintain,” “progress,” “future,” “emerge,” “assure,” “on track,” “well positioned to,” “look forward to,” “looking ahead,” “to acquire,” “achieve,” “strategic vision,” “ongoing headwinds,” “growth opportunities,” “view,” 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 the Covid-19 pandemic, the ability to control costs and successfully execute our growth strategies, expected economic trends, the ability to anticipate consumer preferences, risks associated with operating in international markets, our ability to achieve intended benefits, cost savings and synergies from acquisitions, the risk of cybersecurity threats and privacy or data security breaches, and the impact of the CARES Act and other legislation, etc. Please refer to the Company’s latest Annual Report on Form 10-K, quarterly report on 10-Q and its other filings with the
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
For the Quarter and Nine Months Ended |
|||||||
(in millions, except per share data) | |||||||
(unaudited) | (unaudited) | ||||||
QUARTER ENDED | NINE MONTHS ENDED | ||||||
Net sales |
|
|
|
|
|||
Cost of sales |
456.5 |
415.5 |
1,506.2 |
1,458.9 |
|||
Gross profit |
616.2 |
915.9 |
2,740.4 |
3,054.5 |
|||
Selling, general and administrative expenses |
1,301.7 |
806.1 |
3,011.2 |
2,405.9 |
|||
Operating income (loss) |
(685.5) |
109.8 |
(270.8) |
648.6 |
|||
Interest expense, net |
13.5 |
10.6 |
39.8 |
36.9 |
|||
Other expense (gain) |
6.0 |
4.0 |
12.8 |
4.4 |
|||
Income before provision for income taxes |
(705.0) |
95.2 |
(323.4) |
607.3 |
|||
Provision for income taxes |
(27.9) |
(22.2) |
34.9 |
112.8 |
|||
Net income (loss) |
|
|
|
|
|||
Net income (loss) per share: | |||||||
Basic |
|
|
|
|
|||
Diluted |
|
|
|
|
|||
Shares used in computing net income (loss) per share: | |||||||
Basic |
276.1 |
290.0 |
279.4 |
289.5 |
|||
Diluted |
276.6 |
290.9 |
280.2 |
291.2 |
|||
DETAIL TO |
||||||||||
For the Quarter and Nine Months Ended |
||||||||||
(in millions) | ||||||||||
(unaudited) | ||||||||||
QUARTER ENDED | ||||||||||
% Change | Constant Currency % Change |
|||||||||
Coach |
|
|
(20)% |
(20)% |
||||||
249.5 |
281.1 |
(11)% |
(11)% |
|||||||
50.7 |
85.3 |
(40)% |
(40)% |
|||||||
Total Tapestry |
|
|
(19)% |
(19)% |
||||||
NINE MONTHS ENDED | ||||||||||
% Change | Constant Currency % Change |
|||||||||
Coach |
|
|
(5)% |
(5)% |
||||||
985.4 |
1,034.9 |
(5)% |
(5)% |
|||||||
252.9 |
304.2 |
(17)% |
(16)% |
|||||||
Total Tapestry |
|
|
(6)% |
(6)% |
||||||
GAAP TO NON-GAAP RECONCILIATION | ||||||||||
(in millions, except per share data) | ||||||||||
(unaudited) | ||||||||||
For the Quarter Ended |
||||||||||
Items Affecting Comparability | ||||||||||
GAAP Basis (As Reported) |
ERP Implementation | Organization- related & Integration Costs |
Impairment | Non-GAAP Basis (Excluding Items) |
||||||
Cost of sales | ||||||||||
Coach |
475.7 |
- |
- |
(61.9) |
537.6 |
|||||
122.5 |
- |
- |
(32.3) |
154.8 |
||||||
18.0 |
- |
- |
(9.8) |
27.8 |
||||||
Gross profit(1) |
|
$ - |
$ - |
|
|
|||||
SG&A expenses | ||||||||||
Coach |
437.6 |
- |
- |
16.4 |
421.2 |
|||||
213.8 |
- |
0.3 |
41.5 |
172.0 |
||||||
548.7 |
- |
0.2 |
485.8 |
62.7 |
||||||
Corporate |
101.6 |
2.8 |
2.9 |
- |
95.9 |
|||||
SG&A expenses |
|
|
|
|
|
|||||
Operating income (loss) | ||||||||||
Coach |
38.1 |
- |
- |
(78.3) |
116.4 |
|||||
(91.3) |
- |
(0.3) |
(73.8) |
(17.2) |
||||||
(530.7) |
- |
(0.2) |
(495.6) |
(34.9) |
||||||
Corporate |
(101.6) |
(2.8) |
(2.9) |
- |
(95.9) |
|||||
Operating income (loss) |
|
|
|
|
|
|||||
Provision for income taxes |
(27.9) |
(0.7) |
(2.5) |
(49.4) |
24.7 |
|||||
Net income (loss) |
|
|
|
|
|
|||||
Net income (loss) per diluted common share |
|
|
$ - |
|
|
|||||
(1) Adjustments within Gross profit are recorded within Cost of sales. | ||||||||||
GAAP TO NON-GAAP RECONCILIATION | |||||||||||
(in millions, except per share data) | |||||||||||
(unaudited) | |||||||||||
For the Nine Months Ended |
|||||||||||
Items Affecting Comparability | |||||||||||
GAAP Basis (As Reported) |
ERP Implementation | Organization- related & Integration Costs |
Impairment | Non-GAAP Basis (Excluding Items) |
|||||||
Cost of sales | |||||||||||
Coach |
2,030.6 |
- |
(0.1) |
(61.9) |
2,092.6 |
||||||
576.4 |
- |
(1.2) |
(32.3) |
609.9 |
|||||||
133.4 |
- |
(4.3) |
(9.8) |
147.5 |
|||||||
Gross profit(1) |
|
$ - |
|
|
|
||||||
SG&A expenses | |||||||||||
Coach |
1,410.2 |
- |
(0.1) |
57.9 |
1,352.4 |
||||||
607.0 |
- |
1.1 |
66.7 |
539.2 |
|||||||
673.8 |
- |
(1.9) |
494.7 |
181.0 |
|||||||
Corporate |
320.2 |
23.6 |
27.4 |
- |
269.2 |
||||||
SG&A expenses |
|
|
|
|
|
||||||
Operating income (loss) | |||||||||||
Coach |
620.4 |
- |
- |
(119.8) |
740.2 |
||||||
(30.6) |
- |
(2.3) |
(99.0) |
70.7 |
|||||||
(540.4) |
- |
(2.4) |
(504.5) |
(33.5) |
|||||||
Corporate |
(320.2) |
(23.6) |
(27.4) |
- |
(269.2) |
||||||
Operating income (loss) |
|
|
|
|
|
||||||
Provision for income taxes |
34.9 |
(5.7) |
(11.9) |
(61.5) |
114.0 |
||||||
Net income (loss) |
|
|
|
|
|
||||||
Net income (loss) per diluted common share |
|
|
|
|
|
||||||
(1) Adjustments within Gross profit are recorded within Cost of sales. | |||||||||||
GAAP TO NON-GAAP RECONCILIATION | |||||||||||
(in millions, except per share data) | |||||||||||
(unaudited) | |||||||||||
For the Quarter Ended |
|||||||||||
Items Affecting Comparability | |||||||||||
GAAP Basis (As Reported) |
ERP Implementation | Integration & Acquisition |
Impact of Tax Legislation |
Non-GAAP Basis (Excluding Items) |
|||||||
Cost of sales | |||||||||||
Coach |
691.7 |
- |
- |
- |
691.7 |
||||||
177.9 |
- |
(4.3) |
- |
182.2 |
|||||||
46.3 |
- |
(0.7) |
- |
47.0 |
|||||||
Gross profit(1) |
|
$ - |
|
$ - |
|
||||||
SG&A expenses | |||||||||||
Coach |
452.8 |
- |
5.5 |
- |
447.3 |
||||||
170.8 |
- |
3.0 |
- |
167.8 |
|||||||
60.4 |
- |
0.1 |
- |
60.3 |
|||||||
Corporate |
122.1 |
14.7 |
7.0 |
- |
100.4 |
||||||
SG&A expenses |
|
|
|
$ - |
|
||||||
Operating income (loss) | |||||||||||
Coach |
238.9 |
- |
(5.5) |
- |
244.4 |
||||||
7.1 |
- |
(7.3) |
- |
14.4 |
|||||||
(14.1) |
- |
(0.8) |
- |
(13.3) |
|||||||
Corporate |
(122.1) |
(14.7) |
(7.0) |
- |
(100.4) |
||||||
Operating income (loss) |
|
|
|
$ - |
|
||||||
Provision for income taxes |
(22.2) |
(3.7) |
(2.4) |
(24.9) |
8.8 |
||||||
Net income (loss) |
|
|
|
|
|
||||||
Net income (loss) per diluted common share |
|
|
|
|
|
||||||
(1) Adjustments within Gross profit are recorded within Cost of sales. | |||||||||||
GAAP TO NON-GAAP RECONCILIATION | |||||||||||
(in millions, except per share data) | |||||||||||
(unaudited) | |||||||||||
For the Nine Months Ended |
|||||||||||
Items Affecting Comparability | |||||||||||
GAAP Basis (As Reported) |
ERP Implementation | Integration & Acquisition |
Impact of Tax Legislation |
Non-GAAP Basis (Excluding Items) |
|||||||
Cost of sales | |||||||||||
Coach |
2,231.5 |
- |
(2.0) |
- |
2,233.5 |
||||||
658.0 |
- |
(5.4) |
- |
663.4 |
|||||||
165.0 |
- |
(1.7) |
- |
166.7 |
|||||||
Gross profit(1) |
|
$ - |
|
$ - |
|
||||||
SG&A expenses | |||||||||||
Coach |
1,383.1 |
- |
5.5 |
- |
1,377.6 |
||||||
517.9 |
- |
10.1 |
- |
507.8 |
|||||||
186.9 |
- |
12.2 |
- |
174.7 |
|||||||
Corporate |
318.0 |
25.1 |
18.4 |
- |
274.5 |
||||||
SG&A expenses |
|
|
|
$ - |
|
||||||
Operating income (loss) | |||||||||||
Coach |
848.4 |
- |
(7.5) |
- |
855.9 |
||||||
140.1 |
- |
(15.5) |
- |
155.6 |
|||||||
(21.9) |
- |
(13.9) |
- |
(8.0) |
|||||||
Corporate |
(318.0) |
(25.1) |
(18.4) |
- |
(274.5) |
||||||
Operating income (loss) |
|
|
|
$ - |
|
||||||
Provision for income taxes |
112.8 |
(6.3) |
(4.5) |
9.2 |
114.4 |
||||||
Net income (loss) |
|
|
|
|
|
||||||
Net income (loss) per diluted common share |
|
|
|
|
|
||||||
(1) Adjustments within Gross profit are recorded within Cost of sales. | |||||||||||
The Company reports information in accordance with
The Company operates on a global basis and reports financial results in
Due to fact that 90% of the Company’s stores were closed or operating under shortened operating hours over the course of quarter, net sales changes for the Company and each segment are based on absolute sales dollar changes and are not presented in accordance with the Company’s comparable sales definition utilized in prior quarters.
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.
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
At |
|||||||
(in millions) | |||||||
(unaudited) | (audited) | ||||||
ASSETS | |||||||
Cash, cash equivalents and short-term investments |
|
|
|||||
Receivables |
190.4 |
298.1 |
|||||
Inventories |
852.9 |
778.3 |
|||||
Other current assets |
190.4 |
246.6 |
|||||
Total current assets |
2,131.9 |
2,556.8 |
|||||
Property and equipment, net |
818.7 |
938.8 |
|||||
Lease right-of-use assets |
1,970.9 |
- |
|||||
Other noncurrent assets |
2,821.5 |
3,381.7 |
|||||
Total assets |
|
|
|||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Accounts payable |
|
|
|||||
Accrued liabilities |
573.9 |
673.6 |
|||||
Short-term lease liabilities |
353.4 |
- |
|||||
Current debt |
11.5 |
0.8 |
|||||
Total current liabilities |
1,138.9 |
918.0 |
|||||
Long-term debt |
1,587.2 |
1,601.9 |
|||||
Long-term lease liabilities |
1,897.3 |
- |
|||||
Other liabilities |
566.5 |
844.0 |
|||||
Stockholders' equity |
2,553.1 |
3,513.4 |
|||||
Total liabilities and stockholders' equity |
|
|
|||||
STORE COUNT | ||||||
At |
||||||
(unaudited) | ||||||
As of | As of | |||||
Directly-Operated Store Count: | Openings | (Closures) | ||||
Coach | ||||||
393 |
- |
(12) |
381 |
|||
International |
596 |
4 |
(9) |
591 |
||
222 |
3 |
(5) |
220 |
|||
International |
205 |
8 |
(9) |
204 |
||
72 |
- |
(1) |
71 |
|||
International |
87 |
- |
- |
87 |
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20200430005276/en/
Analysts & Media:
Global Head of Investor Relations and Corporate Communications
212/629-2618
aresnick@tapestry.com
Vice President, Investor Relations
212/946-7252
ccolone@tapestry.com
Source: