Tapestry, Inc. Reports Fiscal 2025 First Quarter Results and Raises Full Year Outlook
- 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
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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 inEurope (+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 omni-channel 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 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 totaled
$1.51 billion , approximately in-line with 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 theU.S. Dollar. -
Gross profit totaled
$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 totaled
$883 million and represented 58.6% of sales on a reported basis. On a non-GAAP basis, SG&A expenses totaled$850 million and represented 56.4% of sales. In the prior year period, SG&A expenses totaled$845 million and represented 55.8% of sales on a reported basis and totaled$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 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 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 expense 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 |
Reported | Constant Currency | |||||
Brand | (in millions) | ||||||
Coach |
$ |
1,170.6 |
1 |
% |
2 |
% |
|
|
|
283.2 |
-7 |
% |
-6 |
% |
|
|
|
53.7 |
2 |
% |
2 |
% |
|
Region | |||||||
|
|
948.2 |
-1 |
% |
-1 |
% |
|
|
|
234.1 |
-4 |
% |
-5 |
% |
|
|
|
117.1 |
-8 |
% |
-4 |
% |
|
Other |
|
86.8 |
11 |
% |
10 |
% |
|
|
|
94.3 |
27 |
% |
27 |
% |
|
Other (3) |
|
27.0 |
2 |
% |
2 |
% |
|
Tapestry |
$ |
1,507.5 |
0 |
% |
0 |
% |
|
(1) |
|||||||
(2) Other Asia includes |
|||||||
(3) Other primarily represents royalties earned from the Company's licensing partners and sales in the |
Balance Sheet and Cash Flow Highlights
-
Cash, cash equivalents and short-term investments totaled
$7.31 billion and total borrowings outstanding were$7.31 billion, reflecting$6.1 billion in senior notes issued inNovember 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$75 million in the prior year. Free cash flow wasan 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
In Fiscal 2025, Tapestry continues to expect to return approximately
Non-GAAP Reconciliation
During the first fiscal quarter of 2025, Tapestry recorded certain items that decreased the Company’s pre-tax income by
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 prior year on a reported and constant currency basis, and ahead of prior guidance for slight growth on 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.
Please note this outlook assumes the following:
- No revenue, net interest, or earnings impact related to the proposed acquisition of Capri Holdings Limited;
- No impact from any potential future share repurchase activity in the Fiscal Year;
-
No further appreciation of the
U.S. Dollar; information provided based on spot rates at the time of forecast; - No material worsening of inflationary pressures or consumer confidence;
- No benefit from the potential reinstatement of the Generalized System of Preferences (“GSP”); and
-
No impact related to any potential policy changes resulting from the outcome of
U.S. Presidential election inNovember 2024 .
Given the dynamic nature of these and other external factors, financial results could differ materially from the outlook provided.
Financial 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 acquisition, financing, purchase accounting and integration-related charges and Company costs associated with the acquisition of Capri Holdings Limited have not yet occurred and cannot be reasonably estimated at this time. Accordingly, a reconciliation of the Company’s non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort.
Conference Call Details
The Company will host a conference call to review these results at
Upcoming Events
The Company expects to report Fiscal 2025 second quarter results on
To receive notification of future announcements, please register at www.tapestry.com/investors ("Subscribe to E-Mail Alerts").
About
Our global house of brands unites the magic of Coach, kate spade new york and
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 “Financial Outlook,” statements regarding long term performance, statements regarding the Company’s capital deployment plans, including anticipated annual dividend rates and share repurchase plans, and statements that can be identified by the use of forward-looking terminology such as "may," “can,” “if,” "continue," “assume,” "should," "expect," “confidence,” “goals,” “trends,” “anticipate,” "intend," "estimate," “on track,” “future,” “plan,” “deliver,” “potential,” “position,” “believe,” “will,” “target,” "guidance," "forecast," “outlook,” “commit,” “leverage,” “generate,” “enhance,” “innovation,” “drive,” “effort,” “progress,” “confident,” “uncertain,” “achieve,” “strategic,” “growth,” “proposed acquisition,” “we can stretch what’s possible,” similar expressions, and variations or negatives of these words. 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 economic conditions, recession and inflationary measures, risks associated with operating in international markets and our global sourcing activities, 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 ability to successfully implement the initiatives under our 2025 growth strategy, the effect of existing and new competition in the marketplace, the satisfaction of the conditions precedent to consummation of the proposed acquisition of Capri Holdings Limited (“Capri”), including the ability to secure regulatory approval in
Schedule 1: Consolidated Statements of Operations
|
|||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
For the Quarter Ended |
|||||
(in millions, except per share data) | |||||
(unaudited) | |||||
QUARTER ENDED | |||||
|
|
||||
Net sales |
$ |
1,507.5 |
|
$ |
1,513.2 |
Cost of sales |
|
372.6 |
|
|
415.5 |
Gross profit |
|
1,134.9 |
|
|
1,097.7 |
Selling, general and administrative expenses |
|
882.9 |
|
|
844.5 |
Operating income (loss) |
|
252.0 |
|
|
253.2 |
Interest expense, net |
|
30.7 |
|
|
13.3 |
Other expense (income) |
|
(4.4 |
) |
|
1.4 |
Income (loss) before provision for income taxes |
|
225.7 |
|
|
238.5 |
Provision (benefit) for income taxes |
|
39.1 |
|
|
43.5 |
Net income (loss) |
$ |
186.6 |
|
$ |
195.0 |
Net income (loss) per share: | |||||
Basic |
$ |
0.81 |
|
$ |
0.85 |
Diluted |
$ |
0.79 |
|
$ |
0.84 |
Shares used in computing net income (loss) per share: | |||||
Basic |
|
231.5 |
|
|
228.3 |
Diluted |
|
235.9 |
|
|
232.5 |
Schedule 2: Detail to
|
||||||||
DETAIL TO |
||||||||
For the Quarter Ended |
||||||||
(in millions) | ||||||||
(unaudited) | ||||||||
QUARTER ENDED | ||||||||
|
|
% Change | Constant Currency % Change | |||||
Coach |
$ |
1,170.6 |
$ |
1,157.4 |
1 |
% |
2 |
% |
|
|
283.2 |
|
303.2 |
(7 |
)% |
(6 |
)% |
|
|
53.7 |
|
52.6 |
2 |
% |
2 |
% |
Total Tapestry |
$ |
1,507.5 |
$ |
1,513.2 |
— |
% |
— |
% |
Schedules 3 & 4: Consolidated Segment Data and GAAP to Non-GAAP Reconciliation
|
|||||||||
GAAP TO NON-GAAP RECONCILIATION | |||||||||
(in millions, except per share data) | |||||||||
(unaudited) | |||||||||
For the Quarter Ended |
|||||||||
Items Affecting Comparability | |||||||||
GAAP Basis (As Reported) |
Acquisition Costs |
Non-GAAP Basis (Excluding Items) |
|||||||
Gross Profit | |||||||||
Coach |
|
916.1 |
|
|
— |
|
|
916.1 |
|
|
|
189.6 |
|
|
— |
|
|
189.6 |
|
|
|
29.2 |
|
|
— |
|
|
29.2 |
|
Gross profit |
$ |
1,134.9 |
|
$ |
— |
|
$ |
1,134.9 |
|
SG&A expenses | |||||||||
Coach |
|
529.5 |
|
|
— |
|
|
529.5 |
|
|
|
162.6 |
|
|
— |
|
|
162.6 |
|
|
|
36.6 |
|
|
— |
|
|
36.6 |
|
Corporate |
|
154.2 |
|
|
33.4 |
|
|
120.8 |
|
SG&A expenses |
$ |
882.9 |
|
$ |
33.4 |
|
$ |
849.5 |
|
Operating income (loss) | |||||||||
Coach |
|
386.6 |
|
|
— |
|
|
386.6 |
|
|
|
27.0 |
|
|
— |
|
|
27.0 |
|
|
|
(7.4 |
) |
|
— |
|
|
(7.4 |
) |
Corporate |
|
(154.2 |
) |
|
(33.4 |
) |
|
(120.8 |
) |
Operating income (loss) |
$ |
252.0 |
|
$ |
(33.4 |
) |
$ |
285.4 |
|
Interest expense, net |
|
30.7 |
|
|
37.4 |
|
|
(6.7 |
) |
Provision for income taxes |
|
39.1 |
|
|
(15.8 |
) |
|
54.9 |
|
Net income (loss) |
$ |
186.6 |
|
$ |
(55.0 |
) |
$ |
241.6 |
|
Net income (loss) per diluted common share |
$ |
0.79 |
|
$ |
(0.23 |
) |
$ |
1.02 |
|
|
|||||||||
GAAP TO NON-GAAP RECONCILIATION | |||||||||
(in millions, except per share data) | |||||||||
(unaudited) | |||||||||
For the Quarter Ended |
|||||||||
Items Affecting Comparability | |||||||||
GAAP Basis (As Reported) |
Acquisition Costs |
Non-GAAP Basis (Excluding Items) |
|||||||
Gross Profit | |||||||||
Coach |
|
867.6 |
|
|
— |
|
|
867.6 |
|
|
|
198.9 |
|
|
— |
|
|
198.9 |
|
|
|
31.2 |
|
|
— |
|
|
31.2 |
|
Gross profit |
$ |
1,097.7 |
|
$ |
— |
|
$ |
1,097.7 |
|
SG&A expenses | |||||||||
Coach |
|
496.3 |
|
|
— |
|
|
496.3 |
|
|
|
172.3 |
|
|
— |
|
|
172.3 |
|
|
|
39.8 |
|
|
— |
|
|
39.8 |
|
Corporate |
|
136.1 |
|
|
19.6 |
|
|
116.5 |
|
SG&A expenses |
$ |
844.5 |
|
$ |
19.6 |
|
$ |
824.9 |
|
Operating income (loss) | |||||||||
Coach |
|
371.3 |
|
|
— |
|
|
371.3 |
|
|
|
26.6 |
|
|
— |
|
|
26.6 |
|
|
|
(8.6 |
) |
|
— |
|
|
(8.6 |
) |
Corporate |
|
(136.1 |
) |
|
(19.6 |
) |
|
(116.5 |
) |
Operating income (loss) |
$ |
253.2 |
|
$ |
(19.6 |
) |
$ |
272.8 |
|
Interest expense, net |
|
13.3 |
|
|
6.7 |
|
|
6.6 |
|
Provision for income taxes |
|
43.5 |
|
|
(5.0 |
) |
|
48.5 |
|
Net income (loss) |
$ |
195.0 |
|
$ |
(21.3 |
) |
$ |
216.3 |
|
Net income (loss) per diluted common share |
$ |
0.84 |
|
$ |
(0.09 |
) |
$ |
0.93 |
|
Management utilizes 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.
The Company reports information in accordance with
The Company operates on a global basis and reports financial results in
The segment operating income and supplemental segment SG&A expenses presented in the Consolidated Segment Data, and GAAP to non-GAAP Reconciliation Table above, as well as SG&A expense ratio, and operating margin, are considered non-GAAP measures. These measures have been presented both including and excluding acquisition costs for the three months ended
The Company also presents free cash flow, which is a non-GAAP measure, Free cash flow is calculated by taking the “Net cash flows provided by (used in) operating activities” less “Purchases of property and equipment” from the Condensed Consolidated Statement of Cash Flows. The Company believes that free cash flow is an important liquidity measure of the cash that is available after capital expenditures for operational expenses and investment in our business. The Company believes that free cash flow is useful to investors because it measures the Company’s ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet, invest in future growth and return capital to stockholders. Adjusted EBITDA is calculated as Net Income, excluding, Interest expense, Provision for income taxes, Depreciation and amortization, Cloud computing amortization costs, Share-based compensation and Items affecting comparability including Acquisition and Integration costs.
Schedule 5: Condensed Consolidated Balance Sheets
|
||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
At |
||||
(in millions) | ||||
(unaudited) | (audited) | |||
|
|
|||
ASSETS | ||||
Cash, cash equivalents and short-term investments |
$ |
7,305.2 |
$ |
7,203.8 |
Receivables |
|
279.0 |
|
228.2 |
Inventories |
|
1,030.8 |
|
824.8 |
Other current assets |
|
530.5 |
|
546.9 |
Total current assets |
|
9,145.5 |
|
8,803.7 |
Property and equipment, net |
|
513.0 |
|
514.7 |
Operating lease right-of-use assets |
|
1,293.6 |
|
1,314.4 |
Other assets |
|
2,776.8 |
|
2,763.5 |
Total assets |
$ |
13,728.9 |
$ |
13,396.3 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Accounts payable |
$ |
544.0 |
$ |
452.2 |
Accrued liabilities |
|
708.6 |
|
656.3 |
Current portion of operating lease liabilities |
|
297.8 |
|
299.7 |
Current debt |
|
303.4 |
|
303.4 |
Total current liabilities |
|
1,853.8 |
|
1,711.6 |
Long-term debt |
|
7,008.3 |
|
6,937.2 |
Long-term operating lease liabilities |
|
1,196.0 |
|
1,224.2 |
Other liabilities |
|
688.9 |
|
626.4 |
Stockholders' equity |
|
2,981.9 |
|
2,896.9 |
Total liabilities and stockholders' equity |
$ |
13,728.9 |
$ |
13,396.3 |
Schedule 6: Condensed Consolidated Statement of Cash Flows
|
||||||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||
At |
||||||
(in millions) | ||||||
(unaudited) | (unaudited) | |||||
|
|
|||||
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES | ||||||
Net income (loss) |
$ |
186.6 |
|
$ |
195.0 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||
Depreciation and amortization |
|
40.9 |
|
|
44.3 |
|
Amortization of cloud computing arrangements |
|
14.0 |
|
|
13.4 |
|
Other non-cash items |
|
0.5 |
|
|
49.7 |
|
Changes in operating assets and liabilities |
|
(122.5 |
) |
|
(227.1 |
) |
Net cash provided by (used in) operating activities |
|
119.5 |
|
|
75.3 |
|
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES | ||||||
Purchases of property and equipment |
|
(25.6 |
) |
|
(20.9 |
) |
Purchases of investments |
|
(1,479.2 |
) |
|
(1.9 |
) |
Proceeds from maturities and sales of investments |
|
1,694.9 |
|
|
— |
|
Net cash provided by (used in) investing activities |
|
190.1 |
|
|
(22.8 |
) |
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES | ||||||
Payment of dividends |
|
(81.4 |
) |
|
(80.2 |
) |
Other items |
|
6.9 |
|
|
(69.2 |
) |
Net cash provided by (used in) financing activities |
|
(74.5 |
) |
|
(149.4 |
) |
Effect of exchange rate on cash and cash equivalents |
|
85.8 |
|
|
(7.1 |
) |
Net (decrease) increase in cash and cash equivalents |
|
320.9 |
|
|
(104.0 |
) |
Cash and cash equivalents at beginning of period |
$ |
6,142.0 |
|
$ |
726.1 |
|
Cash and cash equivalents at end of period |
$ |
6,462.9 |
|
$ |
622.1 |
|
Schedule 7: Store Count by Brand
|
||||||||
STORE COUNT | ||||||||
At |
||||||||
(unaudited) | ||||||||
As of
|
As of
|
|||||||
Directly-Operated Store Count: | Openings | (Closures) | ||||||
Coach | ||||||||
|
324 |
|
2 |
|
(1) |
|
325 |
|
International |
606 |
|
4 |
|
(16) |
|
594 |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
197 |
|
3 |
|
(3) |
|
197 |
|
International |
181 |
|
3 |
|
(6) |
|
178 |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
34 |
|
— |
|
— |
|
34 |
|
International |
60 |
|
2 |
|
(2) |
|
60 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20241107011142/en/
Media:
Chief Communications Officer
212/629-2618
aresnick@tapestry.com
Analysts and Investors:
Global Head of Investor Relations
212/946-7252
ccolone@tapestry.com
Source: