Tapestry, Inc. Achieves All-Time High Q2 Revenue and Earnings per Share Upgrades Fiscal 2024 Earnings per Share Forecast

Tapestry, Inc. (NYSE: TPR), the conglomerate housing renowned lifestyle brands such as Coach, Kate Spade, and Stuart Weitzman, disclosed its fiscal second-quarter results concluding on December 30, 2023. Joanne Crevoiserat, the Chief Executive Officer, expressed satisfaction with the quarter’s performance, surpassing expectations and underscoring the influence of brand development and meticulous execution. The company achieved record revenue and earnings per share (EPS) during the crucial holiday season, prompting an upward revision of the EPS outlook for the entire fiscal year.

Crevoiserat affirmed the commitment to sustainable growth and shareholder value. The company’s focus includes placing the consumer at the core of operations, fortifying brand futures, and utilizing their data-driven customer engagement platform to enhance creativity, speed, and agility.

Tapestry, Inc. Highlights for the Fiscal Second Quarter:

  1. Building Lasting Customer Relationships:
    • Engaged customers actively, welcoming around 2.5 million new customers in North America, with approximately half being from Gen Z and Millennials.
  2. Powering Global Growth:
    • Achieved international revenue growth of 12%, with notable gains in Greater China (19%), Japan (6%), Other Asia (9%), and Europe (11%).
    • Maintained North America revenue in line with the prior year while expanding gross and operating margin.
  3. Delivering Compelling Omni-Channel Experiences:
    • Increased Direct-to-Consumer revenue by 4% at constant currency.
    • Maintained a strong position in the digital landscape, representing about one-third of total revenue.
  4. Fueling Fashion Innovation and Product Excellence:
    • Introduced innovative assortments, leading to handbag average unit retail (AUR) gains globally.
    • Expanded gross margin by 300 basis points, benefitting from lower freight expense and operational efficiency.

Fiscal 2024 Second Quarter Financial Results Overview:

  • Net sales reached $2.08 billion, growing 3% on both reported and constant currency bases.
  • Gross profit was $1.49 billion, with a gross margin of 71.6%.
  • SG&A expenses were $1.05 billion, representing 50.2% of sales on a reported basis.
  • Operating income stood at $448 million, with a reported operating margin of 21.5%.
  • Net income was $322 million, with earnings per diluted share of $1.39.

Balance Sheet and Cash Flow Highlights:

  • Cash, cash equivalents, and short-term investments totaled $7.46 billion.
  • Inventory was $825 million, 15% below the prior year’s ending inventory.

Dividend:

  • The Board of Directors declared a quarterly cash dividend of $0.35 per common share.

Acquisition of Capri Holdings Limited:

  • Progress continues towards regulatory approvals, with the State Administration for Market Regulation in China approving the transaction.
  • Tapestry issued $6.1 billion in USD and EUR bonds in November 2023.
  • Integration planning efforts are ongoing, targeting over $200 million in cost synergies within three years of closing.

Financial Outlook for Fiscal 2024:

  • Anticipates revenue of approximately $6.7 billion, representing a 1% increase on a reported basis and 2% on a constant currency basis.
  • Earnings per diluted share expected to be between $4.20 and $4.25, signifying 8% to 9% growth compared to the prior year.
  • Free cash flow estimated at approximately $1.1 billion, excluding deal-related costs.

Note: The outlook considers factors such as no contribution from the proposed acquisition of Capri Holdings Limited, a gradual recovery in Greater China, stable inflationary pressures, and no benefit from the potential reinstatement of the Generalized System of Preferences (GSP). External factors may influence financial results. Non-GAAP financial measure guidance reconciliation is pending due to uncertain material items.

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