| · Delivered Revenue and Earnings Ahead of the Company’s Outlook led by Growth at Coach |
| · Achieved Diluted EPS of $0.79 and Record non-GAAP Diluted EPS of $1.02 |
| · Fueled 280 Basis Points of Gross Margin Expansion and Strong Operating and Free Cash Flow |
| Tapestry, Inc. (NYSE: TPR), a house of iconic accessories and lifestyle brands consisting of Coach, Kate Spade, and Stuart Weitzman, today reported results for the fiscal first quarter ended September 28, 2024. |
| Joanne Crevoiserat, Chief Executive Officer of Tapestry, Inc., said, “Our first quarter results outperformed expectations, showcasing the brand magic and operational excellence that fuel our strategic growth agenda. Our talented global teams fostered consumer connections through innovative products, experiences, and storytelling while managing our business with focus and discipline against a dynamic backdrop. We remain in a position of strength, with distinctive brands, an agile platform, and robust cash flow that provide us with strategic and financial flexibility to deliver accelerated organic growth and enhanced value creation in FY25 and for years to come.” |
| Tapestry, Inc. Strategic & Financial Highlights |
| The Company advanced its strategic priorities throughout the quarter, resulting in double-digit adjusted EPS growth and strong cash flow generation despite the complex global economic and consumer environment. Highlights included: |
| Build Lasting Customer Relationships |
| · Drove customer engagement across brands, acquiring approximately 1.4 million new customers in North America alone, of which over half were Gen Z and Millennials. |
| Power Global Growth |
| · Delivered revenue approximately in line with prior year on a reported and constant currency basis, ahead of the Company’s outlook; drove topline growth at Coach, which continued to outpace expectations at increasing profitability; |
| · Achieved International topline gains of 2% at constant currency, which included strength in Europe (+27%), partially offset, as expected, by a decrease in revenue in total APAC (-2%); |
| · Realized a 1% sales decline in North America, which included the planned decrease in wholesale; delivered higher operating margin and profit dollars in the region compared to last year driven by gross margin expansion; |
| · Drove double-digit adjusted earnings per diluted share growth, ahead of expectations, while making ongoing strategic investments in brand-building, notably through marketing; |
| · Generated strong cash flow from operating activities of $120 million and free cash flow of $94 million, fueling the Company’s long-term growth agenda and shareholder return program via its dividend. |
| Deliver Compelling Omni-Channel Experiences |
| · Provided unique and seamless omnichannel experiences, with a focus on driving brand desire, consumer connections, and cultural relevance, underpinned by Tapestry’s data-driven, customer engagement platform; |
| · Achieved direct-to-consumer sales in line with the prior year on a constant currency basis, which included a high-single-digit increase in Digital revenue and a low-single-digit decline in global brick-and-mortar sales. |
| Fuel Fashion Innovation and Product Excellence |
| · Delivered strong innovation to consumers, highlighted by Coach, which drove handbag revenue growth and AUR gains; |
| · Remained disciplined brand-builders and operators, underscored by significant gross margin expansion of 280 basis points, which included operational outperformance, lower freight expense, and FX tailwinds; |
| · Leveraged Tapestry’s agile supply chain to deliver creativity, value, and craftsmanship globally, while enabling diligent inventory management against a rapidly shifting landscape. |
| Overview of Fiscal 2025 First Quarter Financial Results |
| · Net sales totalled $1.51 billion, approximately in line with the prior year on both a reported and constant currency basis. FX represented a 40-basis point headwind in the quarter due to the appreciation of the U.S. Dollar. |
| · Gross profit totalled $1.13 billion, while gross margin was 75.3%, driven by operational improvements of 180 basis points, as well as a benefit of 60 basis points from lower freight expense, as well as FX tailwinds. This compared to prior year gross profit of $1.10 billion, representing a gross margin of 72.5%. |
| · SG&A expenses totalled $883 million and represented 58.6% of sales on a reported basis. On a non-GAAP basis, SG&A expenses totalled $850 million and represented 56.4% of sales. In the prior year period, SG&A expenses totalled $845 million and represented 55.8% of sales on a reported basis and totalled $825 million and represented 54.5% of sales on a non-GAAP basis. |
| · Operating income was $252 million on a reported basis, while operating margin was 16.7%. On a non-GAAP basis, operating income was $285 million, while operating margin was 18.9%. This compares to a reported operating income of $253 million and a 16.7% operating margin and non-GAAP operating income of $273 million and an 18.0% operating margin in the prior year period. |
| · Net interest was an expense of $31 million on a reported basis and income of $7 million on a non-GAAP basis. This is compared to net interest expense in the prior year of $13 million on a reported basis and $7 million on a non-GAAP basis. |
| · Other income was $4 million as compared to other expenses of $1 million in the prior year period. |
| · Net income was $187 million, with earnings per diluted share of $0.79. On a non-GAAP basis, net income was $242 million, with earnings per diluted share of $1.02. In the prior year period, net income was $195 million, with earnings per diluted share of $0.84. On a non-GAAP basis, net income in the prior year was $216 million, with earnings per diluted share of $0.93. On a reported basis, the tax rate for the quarter was 17.3% or 18.5% on a non-GAAP basis. In the prior year period, the tax rate was 18.2% or 18.3% on a non-GAAP basis. |
| Summary of Revenue Information (Unaudited) – in USD millions |
|
|
|
% Change |
|
Quarter Ended
September 28, 2024 |
|
Reported |
Constant Currency |
| Brand |
(in millions) |
|
|
|
| Coach |
$ |
1,170.6 |
|
1 |
% |
2 |
% |
| Kate Spade |
|
283.2 |
|
-7 |
% |
-6 |
% |
| Stuart Weitzman |
|
53.7 |
|
2 |
% |
2 |
% |
|
|
|
|
|
| Region |
|
|
|
|
| North America |
|
948.2 |
|
-1 |
% |
-1 |
% |
| Greater China (1) |
|
234.1 |
|
-4 |
% |
-5 |
% |
| Japan |
|
117.1 |
|
-8 |
% |
-4 |
% |
| Other Asia (2) |
|
86.8 |
|
11 |
% |
10 |
% |
| Europe |
|
94.3 |
|
27 |
% |
27 |
% |
| Other (3) |
|
27.0 |
|
2 |
% |
2 |
% |
|
|
|
|
|
| Tapestry |
$ |
1,507.5 |
|
0 |
% |
0 |
% |
|
| (1) Greater China includes mainland China, Taiwan, Hong Kong SAR and Macao SAR. |
| (2) Other Asia includes Malaysia, Australia, New Zealand, South Korea, Singapore, and other countries within Asia. |
| (3) Other primarily represents royalties earned from the Company's licensing partners and sales in the Middle East. |
| Balance Sheet and Cash Flow Highlights |
| · Cash, cash equivalents and short-term investments totalled $7.31 billion and total borrowings outstanding were $7.31 billion, reflecting $6.1 billion in senior notes issued in November 2023 to fund the proposed acquisition of Capri Holdings Limited. |
| · Inventory was $1.03 billion compared to the prior year’s ending inventory of $943 million, reflecting a higher level of in-transits, consistent with expectations. |
| · Cash flow from operating activities for the first fiscal quarter was an inflow of $120 million compared to an inflow of $75 million in the prior year. Free cash flow was an inflow of $94 million compared to an inflow of $54 million in the prior year. This included CapEx and implementation costs related to Cloud Computing of $30 million versus $29 million a year ago. |
| Dividend |
| The Company’s Board of Directors declared a quarterly cash dividend of $0.35 per common share payable on December 23, 2024, to shareholders of record as of the close of business on December 6, 2024. |
| In Fiscal 2025, Tapestry continues to expect to return approximately $325 million to shareholders through dividend payments for an anticipated annual dividend rate of $1.40 per share. |
| Non-GAAP Reconciliation |
| During the first fiscal quarter of 2025, Tapestry recorded certain items that decreased the Company’s pre-tax income by $71 million, net income by $55 million, and earnings per diluted share by $0.23. These items relate to acquisition costs, primarily associated with financing and professional fees. |
| 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 is raising its Fiscal 2025 outlook, which is provided on a non-GAAP basis. The Company now expects: |
| · Revenue of over $6.75 billion, representing growth of approximately 1% to 2% versus the prior year on a reported and constant currency basis, and ahead of prior guidance for slight growth on a reported basis and approximately 1% on a constant currency basis; |
| · Operating margin expansion over 50 basis points compared to prior year; |
| · Net interest income of approximately $20 million; |
| · Tax rate of approximately 19%; |
| · Weighted average diluted share count of approximately 238 million shares; |
| · Earnings per diluted share of $4.50 to $4.55, representing mid-single-digit growth compared to the prior year, and an increase from the Company’s prior guidance of $4.45 to $4.50; |
| · Free cash flow of approximately $1.1 billion, excluding deal-related costs. |
| For the full document click the link below: |
| Tapestry Inc |
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