Delivers Strong Sales, Operating Income and
Earnings Per Diluted Share Growth
Tapestry, Inc. (NYSE: TPR), a leading New York-based house of
modern luxury accessories and lifestyle brands, today reported
first quarter results for the period ended September 29, 2018.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20181030005344/en/
(Photo: Business Wire)
Victor Luis, Chief Executive Officer of Tapestry, Inc., said “At
the one year anniversary of establishing Tapestry as our new
corporate identity, our results continue to reflect the benefits of
our diversified multi-brand model. First quarter performance was
consistent with our expectations as we achieved strong increases in
sales and operating income, while earnings per share gains were
further enhanced by a favorable tax rate.”
“Results were driven by continued growth at Coach, where global
comparable store sales rose 4%, led by outperformance in digital,
and reflected our compelling offering across categories and
channels. Further, we drove leverage to the operating income line
through significant gross margin expansion.”
“Kate Spade contributed to our overall performance, as we made
continued progress on our integration efforts including the
realization of synergies and the execution of strategic
initiatives. Most importantly, we were delighted by the very
positive editorial and trade reception to Creative Director Nicola
Glass’s inaugural collection presented at the brand’s Spring 2019
New York Fashion Week runway show in September. This underscores
our confidence in the anticipated return to positive comps in the
second half of the fiscal year when the full collection launches
globally.”
“At Stuart Weitzman, trends improved from the prior quarter,
though results, as anticipated, continued to be negatively impacted
by development and delivery delays which pressured sales and
margins. Production levels and shipments have now stabilized,
reflecting the investment in talent and processes as well as added
manufacturing capacity. As a result, we remain on track to achieve
profitable sales growth in the holiday quarter.”
“Across Tapestry, we remain focused on executing our strategic
priorities. To this end, during September and October we completed
the buybacks of the Kate Spade operations in Singapore, Malaysia
and Australia as well as the Stuart Weitzman business in Southern
China. We are also excited to announce an agreement to acquire the
Stuart Weitzman business in Australia from our distribution
partner, which is expected to close next summer. These initiatives
will allow us to accelerate international growth and enhance each
brand’s development in these markets.”
Non-GAAP Reconciliation and Recast of Prior Year Results:
During the fiscal first quarter, the Company recorded pre-tax
charges associated with Integration and Acquisition activities and
the Company’s ERP implementation efforts. Taken together, these
items decreased the Company’s first quarter reported net income by
approximately $19 million or about $0.06 per diluted share. Please
refer to the financial tables included herein for a detailed
reconciliation of the Company’s reported to non-GAAP results.
As previously announced, beginning in fiscal 2019, the Company
changed its expense reporting to more closely align with the
organizational structure and management of the business.
Accordingly, certain SG&A expenses that were reported within
the Company’s reportable segments in fiscal 2018 are now reflected
as Corporate expense. These costs primarily relate to employee
costs within shared functional groups. Additionally, and to a
lesser extent, certain amounts within the Kate Spade segment,
primarily relating to compensation in the supply chain function,
have been reclassified from SG&A to Cost of Sales. Information
consistent with this recast, including restated prior year results,
can be found below as well as in the Form 8-K filed with the SEC
today.
Overview of First Quarter 2019
Tapestry, Inc. Results:
Please note that comparable fiscal 2018 first quarter
performance includes the contribution of Kate Spade for the period
subsequent to the closing of the acquisition on July 11, 2017
through the end of the fiscal quarter on September 30, 2017.
- Net sales totaled $1.38 billion
for the first fiscal quarter as compared to $1.29 billion in the
prior year, an increase of 7% on a reported and constant currency
basis.
- Gross profit totaled $935
million on a reported basis, while gross margin for the quarter was
67.7% compared to $763 million and 59.2%, respectively, in the
prior year. On a non-GAAP basis, gross profit totaled $936 million,
while gross margin was 67.8% as compared to $851 million and 66.1%,
respectively, in the prior year.
- SG&A expenses totaled $777
million on a reported basis and represented 56.3% of sales compared
to $785 million and 60.9%, respectively in the year-ago quarter. On
a non-GAAP basis, SG&A expenses were $755 million and
represented 54.6% of sales as compared to $683 million and 52.9%,
respectively, in the year-ago period.
- Operating income totaled $158
million on a reported basis, while operating margin was 11.4%
versus a loss of $22 million and an operating margin of (1.7%) in
the prior year. On a non-GAAP basis, operating income was $181
million, an increase of 7% versus the prior year‘s operating income
of $169 million, while operating margin was 13.1%, consistent with
prior year.
- Net interest expense was $13
million in the quarter as compared to $21 million in the year ago
period.
- Net income for the quarter was
$122 million on a reported basis, with earnings per diluted share
of $0.42. This compared to a reported net loss of $18 million with
earnings per diluted share of ($0.06) in the prior year period. The
reported tax rate for the quarter was 15.5% compared to a reported
tax rate of 58.1% in the prior year. On a non-GAAP basis, net
income for the quarter totaled $142 million, with earnings per
diluted share of $0.48. This compared to non-GAAP net income of
$120 million with earnings per diluted share of $0.42 in the prior
year period. The non-GAAP tax rate for the quarter was 15.8%
compared to a 19.3% in the prior year.
- Inventory was $821 million at
the end of quarter versus ending inventory of $853 million in the
year ago period.
First fiscal quarter results in each of the Company’s reportable
segments were as follows:
Coach First Quarter of 2019
Results:
- Net sales for Coach totaled $961
million for the first fiscal quarter as compared to $924 million in
the prior year, an increase of 4% on a reported and constant
currency basis. Global comparable store sales increased 4%,
including a benefit of approximately 50 basis points driven by an
increase in global e-commerce.
- Gross profit for Coach totaled
$680 million on a reported basis, while gross margin was 70.8%. On
a non-GAAP basis, gross profit was $682 million, while gross margin
was 71.0%. This compared to prior year gross profit and gross
margin of $632 million and 68.4%, respectively, on both a reported
and non-GAAP basis.
- SG&A expenses totaled $449
million for Coach and represented 46.7% of sales as compared to
$424 million and 45.9%, respectively, in the year-ago quarter on
both a reported and non-GAAP basis.
- Operating income for Coach
totaled $231 million on a reported basis, while operating margin
was 24.0%. On a non-GAAP basis, operating income for Coach was $233
million, while operating margin was 24.2%. This compared to
operating income of $208 million and an operating margin of 22.5%
in the prior year on both a reported and non-GAAP basis.
Kate Spade First Quarter of 2019
Results:
- Net sales for Kate Spade totaled
$325 million for the first fiscal quarter as compared to $269
million in the prior year, an increase of 21% on a reported and
constant currency basis. The prior year’s first quarter results are
for the period subsequent to the closing of the acquisition on July
11, 2017 through the end of the fiscal quarter on September 30,
2017. Global comparable store sales declined 5%, including the
positive impact of approximately 300 basis points from an increase
in global e-commerce.
- Gross profit for Kate Spade
totaled $208 million on a reported basis, while gross margin for
the quarter was 63.8% as compared to $75 million and 27.8%,
respectively, in the prior year. On a non-GAAP basis, first quarter
gross profit was $206 million, while gross margin was 63.4% as
compared to $163 million and 60.7%, respectively, in the year ago
period.
- SG&A expenses for Kate Spade
were $163 million on a reported basis and represented 50.1% of
sales. This compared to reported SG&A expenses of $198 million
in the year ago period, which represented 73.7% of sales. On a
non-GAAP basis, SG&A expenses were $159 million and represented
49.0% of sales. This compared to expenses of $130 million or 48.5%
of sales on a non-GAAP basis in the previous year.
- Operating income for Kate Spade
was $45 million on a reported basis, representing an operating
margin of 13.8%. This compared to a loss of $123 million and an
operating margin of (45.9%) on a reported basis in the year ago
period. On a non-GAAP basis, operating income totaled $47 million,
while operating margin was 14.4%. This compared to operating income
of $33 million and an operating margin of 12.2% on a non-GAAP basis
in the previous year.
Stuart Weitzman First Quarter of 2019
Results:
- Net sales for Stuart Weitzman
totaled $95 million for the first fiscal quarter compared to $96
million reported in the same period of the prior year, a decrease
of 1% on a reported and constant currency basis.
- Gross profit for Stuart Weitzman
totaled $48 million on a reported basis and non-GAAP basis, while
gross margin for the quarter was 50.2%. This compared to gross
profit of $56 million and a gross margin of 58.1% in the prior
year’s first quarter on a reported and non-GAAP basis.
- SG&A expenses for Stuart
Weitzman were $66 million on a reported basis and represented 69.6%
of sales as compared to $47 million or 48.9% of sales in the prior
year’s first quarter. On a non-GAAP basis, SG&A expenses were
$55 million or 57.5% of sales as compared to $46 million or 48.0%
of sales in the prior year.
- Operating income for Stuart
Weitzman was a loss of $18 million on a reported basis, while
operating margin was (19.4)% versus income of $8.9 million and
9.2%, respectively, in the prior year. On a non-GAAP basis,
operating income was a loss of $7 million or (7.3)% of sales versus
income of $9.8 million and 10.1%, respectively, in the prior
year.
Mr. Luis added, “Our first quarter performance and progress on
our strategic priorities to date, give us confidence in our ability
to achieve the goals we’ve set out for fiscal 2019. We continue to
expect to deliver strong revenue and operating income growth, while
making investments to support our long-term vision and drive a
return to both double-digit operating income and earnings per share
growth in fiscal 2020. We will continue to harness the power of our
multi-brand model, fuel innovation across brands, drive global
growth, and advance our digital and data analytics
capabilities.”
“As we look forward to holiday and beyond, we are excited about
the level of fashion innovation we’ll be introducing across our
brands. We remain well positioned to drive positive comparable
store sales for Coach driven by a broad and compelling product
assortment across price points, categories, usage occasions,
channels and geographies augmented by an enhanced shopping
experience, whether in stores or online. For Kate, we look forward
to continued distribution growth, notably in international markets,
and the arrival of Nicola’s first collection in January. And, for
Stuart Weitzman, where we’ve made significant progress in creating
the infrastructure to support our evolution strategy, we remain on
track to return to growth during the holiday season.”
“Overall, we are proud of our continued progress and are very
excited about the opportunities ahead for Tapestry and each of our
brands,” Mr. Luis concluded.
Fiscal Year 2019 Outlook
The following fiscal 2019 guidance is provided on a non-GAAP
basis.
The Company continues to expect revenues for fiscal 2019 to
increase at a mid-single-digit rate from fiscal 2018 to $6.1-$6.2
billion.
The Company is also maintaining its guidance for the operating
income growth rate to exceed the revenue growth rate, reflecting
the organic growth of the business, the realization of incremental
synergies from the Kate Spade acquisition as well as the impact of
distributor consolidations and buybacks and systems investments. As
previously announced, the Company expects that cost savings
resulting from synergies related to the Kate Spade acquisition will
total $100-$115 million in FY19.
Net interest expense is still expected to be approximately $50
million for the year. The full year fiscal 2019 tax rate is now
projected at about 19% to 20% with the increase over prior year due
primarily to the introduction of a new tax regime requiring a
current inclusion in U.S. federal taxable income of certain
earnings of controlled foreign corporations (known as “GILTI”). The
decrease from the previous FY19 tax rate guidance of 21-22%
reflects additional clarification around the impact of the GILTI
provision, the expected benefit from the foreign-derived intangible
income (‘FDII’) deduction and the actualized impact of the ASU
2016-09 equity compensation deduction in the first quarter.
Overall, the Company now projects earnings per diluted share in
the range of $2.75-$2.80, up from the previous guidance range of
$2.70-$2.80.
Fiscal Year 2019 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
charges related to Integration and Acquisition, the costs
associated with the Company’s ERP implementation as well as the
impact of the tax legislation changes recently enacted in the U.S,
have not yet occurred or are out of the Company’s control.
Accordingly, a reconciliation of our non-GAAP financial measure
guidance to the corresponding GAAP measures is not available
without unreasonable effort. Where possible, the Company has
identified the estimated impact of the items excluded from its
fiscal 2019 guidance.
This fiscal 2019 non-GAAP guidance excludes (1) expected pre-tax
charges of approximately $20 million attributable to the Company’s
ERP implementation efforts; and (2) estimated pre-tax Integration
and Acquisition charges of approximately $60 million (of which
approximately $5-$10 million is estimated to be non-cash) as the
Company continues to develop its integration plan.
Conference Call Details:
The Company will host a conference call to review these results
at 8:30 a.m. (ET) today, October 30, 2018. Interested parties may
listen to the conference call via live webcast by accessing
www.tapestry.com/investors on the Internet or calling
1-877-510-8087 or 1-862-298-9015 and providing the Conference ID
5699274. 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 1-800-585-8367 or 1-404-537-3406 and enter
the Conference ID 5699274. 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.
The Company expects to report fiscal 2019 second quarter
financial results on Tuesday, February 5, 2019. To receive
notification of future announcements, please register at
www.tapestry.com/investors ("Subscribe to E-Mail Alerts").
Tapestry, Inc. is a New York-based house of modern luxury
lifestyle brands. The Company’s portfolio includes Coach, Kate
Spade and Stuart Weitzman. Our Company and our brands are founded
upon a creative and consumer-led view of luxury that stands for
inclusivity and approachability. 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. To learn more
about Tapestry, please visit www.tapestry.com. 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 2019 Outlook,” as
well as 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,” "anticipate," “excited about,” “moving,”
“leveraging,” “capitalizing,” “developing,” “drive,” “targeting,”
“assume,” “plan,” “build,” “pursue,” “maintain,” “on track,” “well
positioned to,” “look forward to,” “to acquire,” “achieve,”
“strategic vision,” “growth opportunities” 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 expected economic trends, the
ability to anticipate consumer preferences, the ability to control
costs and successfully execute our transformation and operational
efficiency initiatives and growth strategies and 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 tax legislation, etc. 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.
TAPESTRY,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
For the Quarters
Ended September 29, 2018 and September 30, 2017
(in millions,
except per share data)
(unaudited)QUARTER ENDED
September 29,
2018
September 30,
2017
Net sales $ 1,381.2 $ 1,288.9 Cost of
sales 446.1 526.0 Gross Profit
935.1 762.9 Selling, general and administrative expenses
777.4 784.7 Operating income
(loss) 157.7
(21.8)
Interest expense, net 13.1 20.5
Income (loss) before provision for income taxes 144.6
(42.3)
Provision for income taxes 22.3
(24.6)
Net income (loss) $ 122.3 $
(17.7)
Net income (loss) per share: Basic $ 0.42 $
(0.06)
Diluted $ 0.42 $
(0.06)
Shares used in computing net income (loss) per share:
Basic 288.8 283.2 Diluted
292.0 286.7
TAPESTRY,
INC.
GAAP TO NON-GAAP
RECONCILIATION
For the Quarters
Ended September 29, 2018 and September 30, 2017
(in millions,
except per share data)
(unaudited)
September 29, 2018
GAAP Basis
(As Reported)
ERP
Implementation(1)
Integration &
Acquisition(2)
Non-GAAP Basis
(Excluding Items)
Gross profit $ 935.1 $ — $
(0.6)
$ 935.7 Selling, general and administrative expenses 777.4
4.0 18.9 754.5 Operating income 157.7 (4.0) (19.5) 181.2
Income before provision for income taxes 144.6 (4.0) (19.5)
168.1 Provision for income taxes 22.3 (1.0) (3.2) 26.5
Net income 122.3 (3.0) (16.3) 141.6 Diluted net
income per share 0.42
(0.01)
(0.05)
0.48
September 30, 2017
GAAP Basis
(As Reported)
Operational
Efficiency Plan(3)
Integration &
Acquisition(2)
Non-GAAP Basis
(Excluding Items)
Gross profit $ 762.9 $ — $ (88.4) $ 851.3 Selling,
general and administrative expenses 784.7 3.1 99.1 682.5
Operating (loss) income (21.8) (3.1) (187.5) 168.8 (Loss)
income before provision for income taxes (42.3) (3.1) (187.5) 148.3
Provision for income taxes (24.6) (1.0) (52.2) 28.6
Net (loss) income (17.7) (2.1) (135.3) 119.7 Diluted net
(loss) income per share (0.06) (0.01) (0.47) 0.42 (1)
Amounts as of September 29, 2018 represent technology
implementation costs.
(2) Amounts as of September 29, 2018
represent integration and acquisition costs related to contract
termination charges, professional fees and limited lifepurchase
accounting adjustments.
Amounts as of September 30, 2017 represent
charges primarily attributable to acquisition and integration costs
related to the purchase of Kate Spade &Company. These charges
include:
- Limited life purchase accounting
adjustments
- Acquisition costs
- Inventory reserves established for the
destruction of inventory
- Severance and other costs related to
contractual payments with certain Kate Spade executives
- Organizational costs as a result of
integration
(3) Amounts as of September 30, 2017 represent technology
infrastructure and organizational efficiency costs.
TAPESTRY,
INC.
GAAP TO NON-GAAP
RECONCILIATION - FOR SEGMENT RESULTS
For the Quarters
Ended September 29, 2018 and September 30, 2017
(in
millions)
(unaudited)
September 29, 2018
GAAP
Coach
Kate
Spade
Stuart Weitzman
Corporate
Non-GAAP
COGS Integration & Acquisition (2.0 )
1.4 — —
Gross
profit $ 935.1 $ (2.0 ) $ 1.4 $ — $ — $
935.7
SG&A Integration & Acquisition — 3.4
11.5 4.0 ERP Implementation — —
— 4.0
SG&A $ 777.4 $
— $ 3.4 $ 11.5 $ 8.0 $ 754.5
Operating income $ 157.7 $ (2.0 ) $ (2.0 ) $ (11.5 ) $ (8.0
) $ 181.2
September 30, 2017 GAAP
Coach Kate Spade
Stuart Weitzman
Corporate Non-GAAP COGS Integration &
Acquisition — (88.4 ) —
—
Gross profit $ 762.9 $ — $
(88.4 ) $ — $ — $ 851.3
SG&A
Integration & Acquisition — 67.8 0.9 30.4 Operational
Efficiency Plan — — —
3.1
SG&A $ 784.7 $ —
$ 67.8 $ 0.9 $
33.5
$ 682.5
Operating (loss) income $ (21.8 ) $ —
$ (156.2 ) $ (0.9 ) $ (33.5 ) $ 168.8
TAPESTRY,
INC.
SEGMENT
INFORMATION
For the Quarters
Ended September 29, 2018 and September 30, 2017
(in
millions)
(unaudited)
Coach
Kate Spade Stuart Weitzman Corporate
Total Three Months Ended September 29,
2018 Net sales $ 960.7 $ 325.4 $ 95.1 $ —
$ 1,381.2 Gross profit 679.7 207.7 47.7 — 935.1 Operating income
(loss) 230.9 44.8 (18.4 ) (99.6 ) 157.7 Income (loss) before
provision for income taxes 230.9 44.8 (18.4 ) (112.7 ) 144.6
Three Months Ended September 30, 2017
Net sales $ 923.7 $ 268.8 $ 96.4 $ — $ 1,288.9 Gross profit 632.1
74.8 56.0 — 762.9 Operating income (loss) 208.1 (123.3 ) 8.9 (115.5
) (21.8 ) Income (loss) before provision for income taxes 208.1
(123.3 ) 8.9 (136.0 ) (42.3 )
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 gross margin, SG&A expense ratio,
and operating margin, have been presented both including and
excluding the effect of certain items related to Integration &
Acquisition-Related Costs and ERP Implementation-Related costs for
Tapestry, Inc. and separately by segment.
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 revenue
results by translating current period revenue in local currency
using the prior year period’s currency conversion rate.
Guidance for certain financial information for the fiscal year
ending June 29, 2019 has also been presented on a non-GAAP
basis.
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.
TAPESTRY,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
At September 29,
2018 and June 30, 2018
(in
millions)
(unaudited) (audited)
September 29,
2018
June 30,
2018
ASSETS Cash, cash equivalents and short-term
investments $ 1,063.2 $ 1,250.0 Receivables 283.1
314.1 Inventories 820.9 673.8 Other current assets 300.3
194.7 Total current assets 2,467.5
2,432.6 Property and equipment, net 888.3 885.4 Other
noncurrent assets 3,347.5 3,360.3
Total assets $ 6,703.3 $ 6,678.3
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable
$ 292.9 $ 264.3 Accrued liabilities 605.8 673.2 Current debt
0.7 0.7 Total current liabilities 899.4
938.2 Long-term debt 1,600.5 1,599.9 Other liabilities 893.8
895.6 Stockholders' equity 3,309.6
3,244.6 Total liabilities and stockholders' equity $
6,703.3 $ 6,678.3
TAPESTRY,
INC.
STORE
COUNT
At June 30, 2018
and September 29, 2018
(unaudited)
As of
June 30,
2018
Acquired As of
Directly-Operated
Store Count:
Stores
Openings
(Closures)
September 29,
2018
Coach
North America 402 — 1 (5) 398 International 585 — 8 (9) 584
Kate
Spade
North America 200 — 12 (1) 211 International 142 6 10 (6) 152
Stuart
Weitzman
North America 68 — — (1) 67 International 35 6 3 — 44
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181030005344/en/
Tapestry, Inc.Analysts & Media:Andrea Shaw Resnick,
212-629-2618Global Head of Investor Relations and Corporate
CommunicationsorChristina Colone, 212-946-7252Vice President,
Investor Relations
Tapestry (NYSE:TPR)
Historical Stock Chart
From Jun 2024 to Jul 2024
Tapestry (NYSE:TPR)
Historical Stock Chart
From Jul 2023 to Jul 2024