- Delivered Record First Quarter Revenue of $1.5 Billion, an
Increase of 2% Versus Prior Year on a Reported Basis and Over 5% in
Constant Currency
- Fueled International Growth of 4% Versus Prior Year on a
Reported Basis and 11% in Constant Currency
- Achieved Diluted EPS of $0.79, Ahead of Guidance
- Maintained Fiscal 2023 Earnings Expectation Excluding
Incremental Currency Headwinds
- Remains on Track to Return a Total of $1 Billion to
Shareholders in Fiscal 2023
Link to Download Tapestry’s Q1 2023 Earnings Presentation,
Including Brand Highlights
Tapestry, Inc. (NYSE: TPR), a leading New York-based house of
iconic accessories and lifestyle brands consisting of Coach, Kate
Spade, and Stuart Weitzman, today reported results for the fiscal
first quarter ended October 1, 2022.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20221110005369/en/
(Photo: Business Wire)
Joanne Crevoiserat, Chief Executive Officer of Tapestry, Inc.,
said, “Our results exceeded expectations despite the more
challenging backdrop, demonstrating the strength of our iconic
brands, the agility of our operating model, and the consistent
execution of our global teams. We delivered record first quarter
revenue, led by International growth, and drove AUR gains in our
core categories. At the same time, we continued to invest in our
brands and business, while returning cash to shareholders,
underscoring our confidence in the significant runway ahead over
our planning horizon.”
“Moving forward, although the environment is uncertain, our
foundation is strong and the clarity of our vision is unchanged. We
will continue to be disciplined in advancing our strategic
objectives through an unwavering focus on the consumer and a
commitment to innovation. Importantly, our competitive advantages
and transformation into a more nimble and responsive organization
position us to drive sustainable, long-term growth and meaningful
shareholder value.”
Shareholder Return
Programs
The Company continues to expect to return approximately $1.0
billion to shareholders in Fiscal 2023 given its strong balance
sheet, free cash flow generation and outlook for growth. This
includes the following assumptions:
- Share Repurchases: Tapestry remains on track to buy back
approximately $700 million in common stock in the fiscal year. As
projected, this includes approximately $100 million spent in the
first quarter to repurchase roughly 3 million shares of its common
stock at an average cost of $33.83.
- Dividend Payments: The Company continues to anticipate
paying an annual dividend of $1.20 per share, representing a 20%
increase compared to prior year, totaling approximately $300
million.
Tapestry, Inc. Fiscal First Quarter
Financial & Strategic Highlights
During the first quarter, the Company advanced its strategic
priorities focused on building lasting customer relationships,
fueling fashion innovation and product excellence, delivering
compelling omni-channel experiences and powering global growth.
Highlights of the quarter were as follows:
- Drove customer engagement with our brands, highlighted
by an increase in spend per customer, supported by higher units per
transaction and stronger purchase frequency; acquired approximately
1.4 million new customers in North America alone;
- Delivered revenue growth of 2% compared to the prior
year; sales rose over 5% year-over-year on a constant currency
basis, excluding an FX headwind of approximately 370 basis
points;
- Achieved a sales increase of 11% at constant currency in
International markets, which included outsized gains in Other
Asia, Japan and Europe, more than offsetting an 11% decline in
Greater China due to Covid-related disruption; in North America,
revenue rose slightly versus prior year on both a reported and
constant currency basis;
- Drove omni-channel growth with a low-single-digit increase
in direct-to-consumer sales at constant currency, led by a
high-single-digit gain in store revenue as consumers
continued to return to in-person experiences, which offset a
high-single-digit decline in Digital; on a two-year basis,
Digital revenue increased over 35% and more than tripled
from FY19 pre-pandemic levels;
- Fueled fashion innovation and product excellence to drive
AUR gains in each brand’s core category at constant currency,
driven by planned ticket increases and enabled by data and
analytics that enhanced the Company’s go-to-market strategies,
including a deeper understanding of consumer preferences;
- Continued to invest in platform capabilities and brand
building, underscored by marketing at 8% of sales, an increase
compared to 7% of revenue in the prior year period;
- Delivered earnings per diluted share ahead of
expectations, including a favorable timing shift of
approximately $0.05 with the second quarter as well as a benefit
from a lower tax rate of $0.03, partially offset by incremental FX
headwinds of approximately $0.03;
- Returned $175 million to shareholders through a combination
of share repurchases and dividends.
Overview of Fiscal First Quarter 2023
Financial Results
- Net sales totaled $1.51 billion for the first quarter
compared to $1.48 billion in the prior year, representing a
reported year-over-year increase of approximately 2%. Excluding a
370 basis point headwind from currency due to the appreciation of
the U.S. Dollar, revenue rose over 5% versus last year.
- Gross profit totaled $1.05 billion, while gross margin
was 70.0%. As anticipated, the Company’s gross margin was
negatively impacted by incremental freight expense, which totaled
$20 million or approximately 130 basis points, as well as an FX
headwind of approximately 70 basis points. This compared to prior
year gross profit of $1.07 billion, representing a gross margin of
72.2%.
- SG&A expenses totaled $800 million and represented
53.1% of sales. This compared to reported SG&A expenses in the
prior year of $774 million, which represented 52.2% of sales. On a
non-GAAP basis, SG&A expenses were $762 million, or 51.4% of
sales in the prior year period.
- Operating income was $254 million, while operating
margin was 16.9%. This compared to reported operating income of
$295 million and operating margin of 19.9% in the prior year. On a
non-GAAP basis, prior year operating income was $307 million, while
operating margin was 20.7%.
- Net interest expense was $7 million in the quarter
compared to $16 million in the year-ago period.
- Other expense was $11 million in the quarter, primarily
due to an FX loss associated with the strengthening of the U.S.
Dollar. This compared to $2 million of other expense in the prior
year period.
- Net income was $195 million, with earnings per diluted
share of $0.79. This compared to reported net income of $227
million and earnings per diluted share of $0.80 in the prior year
period. On a non-GAAP basis, net income was $235 million with
earnings per diluted share of $0.82 in the prior year period. The
tax rate for the quarter was 17.3%, as compared to the prior year
tax rate of 18.0% on a reported basis and 18.6% on a non-GAAP
basis.
Balance Sheet and Cash Flow
Highlights
- Cash, cash equivalents and short-term investments
totaled $557 million and total borrowings outstanding were
$1.68 billion.
- Inventory at quarter-end was $1.14 billion versus ending
inventory of $818 million a year ago, which included an increase of
nearly 50% in in-transits year-over-year.
- Free cash flow for the quarter was an outflow of $198
million compared to an outflow of $12 million in the prior year.
CapEx and implementation costs related to Cloud
Computing for the quarter were $45 million versus $33 million a
year ago.
Fiscal Year 2023 Outlook
The Company is updating its Fiscal 2023 earnings outlook due
entirely to an estimated headwind of $0.20 based on incremental
currency pressure resulting from the further strengthening of the
U.S. Dollar. Excluding this FX impact, the Company’s earnings
outlook is unchanged from prior guidance, as a more modest revenue
outlook in North America and Greater China is expected to be fully
offset by outperformance in Rest of Asia and Europe, additional
expense reductions, and tax rate favorability, demonstrating the
agility of Tapestry’s globally diversified model.
Tapestry expects the following for Fiscal 2023, which replaces
all previous guidance:
- Revenue of $6.5 billion to $6.6 billion. This represents
a slight decline versus prior year on a reported basis due entirely
to approximately 450 basis points of FX pressure. On a constant
currency basis, revenue growth is expected to be roughly 2% to
4%.
- Net interest expense of approximately $30 to $35
million;
- Tax rate of approximately 20%;
- Weighted average diluted share count of approximately
242 million shares, incorporating approximately $700 million of
expected share repurchases;
- Earnings per diluted share of $3.60 to $3.70,
representing mid-single digit growth compared to the prior year and
includes a currency headwind of approximately $0.50.
In addition, the Company reiterates its 2025 strategic growth
plan and financial targets as provided at its September 2022
Investor Day.
The Company's outlook assumes the following:
- No further appreciation of the U.S. Dollar; information
provided based on spot rates at the time of forecast;
- Continued gradual recovery in Greater China from Covid-related
disruption; no further significant lockdowns or incremental supply
chain pressures from the Covid-19 pandemic;
- No material worsening of inflationary pressures or consumer
confidence; and
- No benefit from the potential reinstatement of the Generalized
System of Preferences (GSP).
Given the dynamic nature of these and other external factors,
financial results could differ materially from the outlook
provided.
Conference Call Details
The Company will host a conference call to review these results
at 8:00 a.m. (ET) today, November 10, 2022. Interested parties may
listen to the conference call via live webcast by accessing
www.tapestry.com/investors or calling 1-866-847-4217 or
1-203-518-9845 and providing the Conference ID 8724729. A telephone
replay will be available starting at 12:00 p.m. (ET) today for a
period of five business days. To access the telephone replay, call
1-800-283-4641 or 1-402-220-0851. A webcast replay of the earnings
conference call will also be available for five business days on
the Tapestry website. Presentation slides have also been posted to
the Company’s website at www.tapestry.com/investors.
Upcoming Events
The Company expects to report Fiscal 2023 second quarter results
on Thursday, February 9, 2023.
To receive notification of future announcements, please register
at www.tapestry.com/investors ("Subscribe to E-Mail Alerts").
About Tapestry, Inc.
Our global house of brands unites the magic of Coach, kate spade
new york and Stuart Weitzman. Each of our brands are unique and
independent, while sharing a commitment to innovation and
authenticity defined by distinctive products and differentiated
customer experiences across channels and geographies. We use our
collective strengths to move our customers and empower our
communities, to make the fashion industry more sustainable, and to
build a company that’s equitable, inclusive, and diverse.
Individually, our brands are iconic. Together, we can stretch
what’s possible. To learn more about Tapestry, please visit
www.tapestry.com. For important news and information regarding
Tapestry, visit the Investor Relations section of our website at
www.tapestry.com/investors. In addition, investors should continue
to review our news releases and filings with the SEC. We use each
of these channels of distribution as primary channels for
publishing key information to our investors, some of which may
contain material and previously non-public information. The
Company’s common stock is traded on the New York Stock Exchange
under the symbol TPR.
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 2023 Outlook,”
statements regarding the Company’s capital deployment plans,
including anticipated annual dividend rates, and statements that
can be identified by the use of forward-looking terminology such as
"may," "will," “can,” "should," "expect," “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,” “we see significant growth
opportunities,” “view,” “stretching 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 the ongoing
Covid-19 pandemic, including impacts on our supply chain due to
temporary closures of our manufacturing partners, price increases,
temporary store closures, as well as production, shipping and
fulfillment constraints, economic conditions, the ability
successfully execute our multi-year growth agenda, our ability to
control costs, 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 effects of existing and
new competition in the marketplace, risks associated with operating
in international markets and our global sourcing activities, 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 pending and potential future
legal proceedings, the impact of tax and other legislation 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
Securities and Exchange Commission for a complete list of risks and
important factors. The Company assumes no obligation to revise or
update any such forward-looking statements for any reason, except
as required by law.
Schedule 1: Consolidated Statement of Operations
TAPESTRY, INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS For the Quarter
Ended October 1, 2022 and October 2, 2021
(in millions, except per share
data) (unaudited) QUARTER ENDED
October 1, 2022 October 2, 2021 Net sales
$
1,506.5
$
1,480.9
Cost of sales
451.9
412.2
Gross profit
1,054.6
1,068.7
Selling, general and administrative expenses
800.3
773.7
Operating income
254.3
295.0
Interest expense, net
7.4
16.1
Other expense (income)
10.7
2.2
Income before provision for income taxes
236.2
276.7
Provision for income taxes
40.9
49.8
Net income
$
195.3
$
226.9
Net income per share: Basic
$
0.81
$
0.82
Diluted
$
0.79
$
0.80
Shares used in computing net income per share: Basic
241.5
278.2
Diluted
246.8
285.2
Schedule 2: Detail to Net Sales
TAPESTRY, INC. DETAIL TO NET SALES For the Quarter Ended October 1, 2022 and October 2,
2021 (in millions)
(unaudited) QUARTER
ENDED October 1, 2022 October 2, 2021 % Change
vs. FY22 Constant Currency %Change vs. FY22 Coach
$
1,119.3
$
1,114.9
0 %
4 %
Kate Spade
321.9
299.5
7 %
10 %
Stuart Weitzman
65.3
66.5
(2)%
- %
Total Tapestry
$
1,506.5
$
1,480.9
2 %
5 %
Schedule 3: Items Affecting Comparability – 1Q22
TAPESTRY, INC. GAAP TO NON-GAAP RECONCILIATION
(in millions, except per share
data) (unaudited)
For the Quarter Ended October 2, 2021 Item
Affecting Comparability GAAP Basis(As Reported)
Acceleration Program Non-GAAP Basis(Excluding Items)
Cost of sales Coach
831.0
-
831.0
Kate Spade
199.2
-
199.2
Stuart Weitzman
38.5
-
38.5
Gross profit(1)
$
1,068.7
$
-
$
1,068.7
SG&A expenses Coach
465.3
1.4
463.9
Kate Spade
162.0
1.4
160.6
Stuart Weitzman
40.0
0.4
39.6
Corporate
106.4
8.9
97.5
SG&A expenses
$
773.7
$
12.1
$
761.6
Operating income (loss) Coach
365.7
(1.4)
367.1
Kate Spade
37.2
(1.4)
38.6
Stuart Weitzman
(1.5)
(0.4)
(1.1)
Corporate
(106.4)
(8.9)
(97.5)
Operating income (loss)
$
295.0
$
(12.1)
$
307.1
Provision for income taxes
49.8
(3.9)
53.7
Net income (loss)
$
226.9
$
(8.2)
$
235.1
Net income (loss) per diluted common share
$
0.80
$
(0.02)
$
0.82
(1) Adjustments within Gross profit are
recorded within Cost of sales.
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 SG&A expense ratio, and operating
margin, have been presented both including and excluding
Acceleration Program costs for the first quarter of fiscal 2022.
There were no items affecting comparability in the first quarter of
fiscal 2023.
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 net sales
results by translating current period net sales in local currency
using the prior year period’s currency conversion rate.
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
historically due to the uncertain business environment resulting
from the impact of the Covid-19 pandemic.
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.
Schedule 4: Condensed Consolidated Balance Sheets
TAPESTRY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
At October 1, 2022 and July 2,
2022 (in millions)
(unaudited) (audited) October 1, 2022
July 2, 2022 ASSETS Cash, cash equivalents and
short-term investments
$
557.1
$
953.2
Receivables
269.6
252.3
Inventories
1,139.8
994.2
Other current assets
420.9
374.1
Total current assets
2,387.4
2,573.8
Property and equipment, net
526.3
544.4
Lease right-of-use assets
1,281.6
1,281.6
Other noncurrent assets
2,884.7
2,865.5
Total assets
$
7,080.0
$
7,265.3
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable
$
510.9
$
520.7
Accrued liabilities
489.8
628.2
Short-term lease liabilities
282.7
288.7
Current debt
25.0
31.2
Total current liabilities
1,308.4
1,468.8
Long-term debt
1,653.4
1,659.2
Long-term lease liabilities
1,273.3
1,282.3
Other liabilities
589.5
569.5
Stockholders' equity
2,255.4
2,285.5
Total liabilities and stockholders' equity
$
7,080.0
$
7,265.3
Schedule 5: Condensed Consolidated Statement of Cash
Flows
TAPESTRY, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the three months ended October 1, 2022
and October 2, 2021 (in
millions) (unaudited) (unaudited)
October 1,2022 October 2,2021 Cash Flows from
Operating Activities Net income
$
195.3
$
226.9
Adjustments to reconcile net income (loss) to net cash flows from
operating activities: Depreciation and amortization
43.8
50.8
Other non-cash items
(10.0)
3.7
Changes in operating assets and liabilities
(399.5)
(259.6)
Net cash provided by (used in) operating activities
(170.4)
21.8
Cash Flows from Investing Activities Purchases of
property and equipment
(27.3)
(33.4)
Other items
174.1
(395.0)
Net cash provided by (used in) investing activities
146.8
(428.4)
Cash Flows from Financing Activities Dividend
payments
(72.7)
(69.6)
Repurchase of common stock
(94.9)
(250.0)
Other items
(58.6)
(26.6)
Net cash provided by (used in) financing activities
(226.2)
(346.2)
Effect of exchange rate on cash and cash equivalents
(13.5)
(2.3)
Net (decrease) increase in cash and cash equivalents
(263.3)
(755.1)
Cash and cash equivalents at beginning of period
$
789.8
$
2,007.7
Cash and cash equivalents at end of period
526.5
1,252.6
Schedule 6: Store Count by Brand – 1Q23
TAPESTRY, INC. STORE COUNT At July
2, 2022 and October 1, 2022 (unaudited) As of As of
Directly-Operated Store Count:
July 2, 2022 Openings (Closures) October 1,
2022 Coach
North America
343
1
(3)
341
International
602
10
(4)
608
Kate Spade North America
207
-
-
207
International
191
3
(2)
192
Stuart Weitzman North
America
39
-
(1)
38
International
61
-
(1)
60
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221110005369/en/
Tapestry, Inc.
Media:
Andrea Shaw Resnick Chief Communications Officer 212/629-2618
aresnick@tapestry.com
Analysts and Investors:
Christina Colone Global Head of Investor Relations 212/946-7252
ccolone@tapestry.com
Kelsey Mueller 212/946-8183 Director of Investor Relations
kmueller@tapestry.com
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