- Second Quarter Net Sales Increased
35% Driven By The Acquisition Of Kate Spade And Organic
Growth
- Second Quarter Operating Income Grew
25% On A GAAP Basis And 40% On A Non-GAAP Basis
- Raises Fiscal 2018 Earnings
Guidance
Tapestry, Inc. (NYSE:TPR) (SEHK:6388), a leading New York-based
house of modern luxury accessories and lifestyle brands, today
reported second quarter results for the period ended December 30,
2017.
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the full release here:
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Victor Luis, Chief Executive Officer of Tapestry, Inc., said
“Our second quarter performance exceeded our expectations, driven
by a return to growth for Coach, sales gains at Stuart Weitzman and
the contribution of Kate Spade as we continued to make progress on
the brand’s integration. Importantly, Coach comparable store sales
rose globally, led by outperformance in North America, reflecting
our strong holiday offering and improved inventory mix, all
supported by festive marketing campaigns. In addition to the top
line gains, we drove significant operating income growth on
better-than-expected profitability metrics, notably gross margin,
while expenses were well controlled and also benefitted from timing
shifts.”
“We have been especially pleased with the key appointments
announced during the second quarter, including strengthening our
Coach leadership team with the additions of Laura Dubin-Wander as
President, North America and Fredrick Malm as President, Europe
& International Wholesale. At Kate Spade, we were delighted to
name Nicola Glass as the brand’s new Creative Director.”
“We are also thrilled to announce several important business
development initiatives, which will allow each of our brands to
assume greater direct control over their international
distribution. To that end, we have now taken operational control of
the Kate Spade joint ventures, for Mainland China, Hong Kong, Macau
and Taiwan. We also entered into a purchase agreement to acquire
the Stuart Weitzman business in Northern China from our
distributor. These transactions are in keeping with our strategic
priority to maximize the opportunity with Chinese consumers
globally across our brands. In addition, we are excited to announce
the buyback of the Coach business in Australia and New Zealand from
our distributor, with an expected closing in the third fiscal
quarter. As a result, we will be creating a Tapestry hub and center
of excellence in Sydney to drive growth across our portfolio,
further unlocking the value of a multi-brand operating model.”
Mr. Luis continued, “Importantly, given our strong year-to-date
financial performance, we expect that we will be able to fund these
strategic actions while maintaining our operating income growth
targets for the year. In addition, in January, we used excess cash
to pay down $1.1 billion in debt, increasing our financial
flexibility and reducing our interest expense. Taken together with
the anticipated benefits from a lower tax rate, we expect to drive
strong double-digit adjusted earnings growth and exceed the annual
earnings guidance we set out for Tapestry at the beginning of the
fiscal year.”
Tax Legislation:
On December 22, 2017, the U.S. President signed into law
“H.R.1”, formerly known as the “Tax Cuts and Jobs Act” (the “Tax
Legislation”), which significantly revises the U.S. tax code. The
revisions most impactful to the Company are (i) the reduction of
the corporate income tax rate from 35% to 21%, and its impact on
the current and deferred tax provision and related accounts, most
notably the re-measurement of the Company’s deferred tax assets and
liabilities, (ii) the implementation of a territorial tax system,
(iii) the imposition of a one-time transition tax on deemed
repatriated earnings of foreign subsidiaries, and (iv) 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 Company expects its reported provision for income taxes to
increase in fiscal 2018 primarily driven by the revisions noted
above, and in particular, two one-time items. The one-time items
are the transition tax on foreign earnings deemed to be repatriated
of $315 million, net of the re-measurement benefit of the net
deferred tax liabilities of approximately $102 million, or $213
million in the aggregate. On a non-GAAP basis, excluding the
one-time items noted, the transition tax and the re-measurement of
deferred tax assets and liabilities, the Company estimates that its
fiscal year 2018 tax rate will be reduced by approximately 5% due
primarily to the lower U.S. corporate tax rate. This provision
excludes any impact associated with GILTI, as GILTI does not affect
the Company until fiscal year 2019.
These amounts reflect the Company’s provisional estimate and are
subject to adjustment as future guidance becomes available,
additional facts become known or estimation approaches are refined.
Additionally, there are certain provisions of the new legislation
that are not applicable to the Company until fiscal 2019, and
therefore, any impact associated with these provisions are not
included in the Provision for income taxes for the quarter ended
December 30, 2017.
Second Quarter 2018 Non-GAAP
Reconciliation Items:
The Company recorded the following on a reported basis:
- Tax Legislation: an increase in
provision for income taxes of $194 million as a result of the
one-time transition tax on foreign earnings deemed to be
repatriated of approximately $296 million, partially offset by the
re-measurement of deferred tax assets and liabilities resulting
from the federal rate reduction of approximately $102 million.
- Integration and Acquisition Costs:
pre-tax charges of approximately $61 million, which primarily
relate to the purchase and integration of Kate Spade. These costs
consist of the normal limited life purchase accounting adjustments,
costs related to contractual agreements with certain Kate Spade
executives, severance as a result of integration and professional
fees.
- Operational Efficiency Plan: pre-tax
charges of approximately $4 million, primarily related to
technology infrastructure costs.
During the second quarter of 2018, these items decreased the
Company’s reported net income by $243 million or about $0.85 per
diluted share in the second quarter.
Overview of Second Quarter 2018
Tapestry, Inc. Results:
Fiscal 2018 second quarter performance includes the contribution
of Kate Spade, which the Company acquired on July 11, 2017 and
therefore is not included in the prior year results.
- Net sales totaled $1.79 billion
for the second fiscal quarter as compared to $1.32 billion in the
prior year, an increase of 35% on both a reported and constant
currency basis.
- Gross profit totaled $1.18
billion on a reported basis, while gross margin for the quarter was
66.0% on a reported basis compared to 68.6% in the prior year. On a
non-GAAP basis, gross profit totaled $1.20 billion, while gross
margin was 67.0% as compared to 68.6% in the prior year.
- SG&A expenses totaled $831
million on a reported basis and represented 46.6% of sales compared
to 47.6% in the year-ago quarter. On a non-GAAP basis, SG&A
expenses were $785 million and represented 44.0% of sales as
compared to 46.3% in the year-ago period.
- Operating income for the quarter
was $346 million on a reported basis, while operating margin was
19.4% versus 21.0% in the prior year. On a non-GAAP basis,
operating income was $411 million, an increase of 40% versus prior
year, while operating margin was 23.0% versus 22.3% in last year’s
second quarter.
- Net interest expense was $22
million in the quarter as compared to $5 million in the year ago
period.
- Net income for the quarter was
$63 million on a reported basis, with earnings per diluted share of
$0.22. This compared to reported net income of $200 million with
earnings per diluted share of $0.71 in the prior year period. On a
non-GAAP basis, net income for the quarter totaled $306 million,
with earnings per diluted share of $1.07. This compared to non-GAAP
net income of $211 million with earnings per diluted share of $0.75
in the prior year period. The tax rate for the quarter was 80.5%
and 21.3% on a reported and non-GAAP basis, respectively,
reflective of the impact of the tax legislation changes, as noted.
This compared to a tax rate of 26.6% and 27.0% in the prior year on
a reported and non-GAAP basis, respectively.
Second fiscal quarter results in each of the Company’s
reportable segments were as follows:
Coach Second Quarter of 2018
Results:
- Net sales for Coach totaled
$1.23 billion for the second fiscal quarter as compared to $1.20
billion in the prior year, an increase of 2% on a reported and
constant currency basis. Global comparable store sales rose 3%,
including a benefit of approximately 100 basis points driven by an
increase in global e-commerce.
- Gross profit for Coach totaled
$846 million on a reported and non-GAAP basis. Gross margin for the
quarter was 68.8%, including approximately 10 basis points of
pressure from currency. This compared to gross margin of 69.0% in
the prior year period on both a reported and non-GAAP basis.
- SG&A expenses totaled $485
million for Coach and represented 39.4% of sales compared to 40.9%
in the year-ago quarter on a reported and non-GAAP basis.
- Operating income for Coach was
$361 million, while operating margin was 29.4% versus 28.1% in the
prior year, both on a reported and non-GAAP basis.
Kate Spade Second Quarter of 2018
Results:
- Net sales for Kate Spade totaled
$435 million, reflecting, in part, the strategic pullback in
wholesale disposition and online flash sales. Global comparable
store sales declined 7%, including the negative impact of
approximately 400 basis points from a decline in global
e-commerce.
- Gross profit for Kate Spade
totaled $258 million on a reported basis, while gross margin for
the period was 59.4%. On a non-GAAP basis, gross profit was $275
million, while gross margin was 63.3%.
- SG&A expenses for Kate Spade
were $213 million on a reported basis and represented 48.9% of
sales. On a non-GAAP basis, SG&A expenses were $183 million and
represented 42.1% of sales.
- Operating income for Kate Spade
was $45 million on a reported basis, representing an operating
margin of 10.5%. On a non-GAAP basis, operating income totaled $92
million, while operating margin was 21.2%.
Stuart Weitzman Second Quarter of 2018
Results:
- Net sales for Stuart Weitzman
totaled $121 million for the second fiscal quarter compared to $118
million reported in the same period of the prior year, an increase
of 2%.
- Gross profit for Stuart Weitzman
totaled $73 million on a reported basis, while gross margin for the
quarter was 60.8% on a reported basis compared to 64.3% in the
prior year. On a non-GAAP basis, gross profit totaled $75 million,
while gross margin was 61.9% as compared to 64.4% in the prior
year.
- SG&A expenses for Stuart
Weitzman were $52 million on a reported basis and represented 43.1%
of sales as compared to 54.1% of sales in the prior year’s second
quarter. On a non-GAAP basis, SG&A expenses were $51 million or
42.4% of sales as compared to 45.6% of sales in the prior
year.
- Operating income for Stuart
Weitzman was $21 million on a reported basis, while operating
margin was 17.6% versus 10.2% in the prior year. On a non-GAAP
basis, operating income was $24 million or 19.6% of sales versus
18.8% in the prior year.
Mr. Luis added, “As we look forward to the balance of our fiscal
year, we are well positioned to drive continued positive comparable
store sales for Coach. We’re very excited about the heightened
level of innovation we will be delivering across categories and
channels as well as the launch of our Spring marketing campaign
featuring Selena Gomez. For Stuart Weitzman, Giovanni Morelli’s new
creative direction is gaining traction. His first collection of
footwear and handbags was very well-received by wholesale partners
and the editorial community and we were excited to unveil a new
Stuart Weitzman store concept at the brand’s Rodeo Drive flagship
this past month. And for Kate Spade, our priority remains
integration and executing the strategic initiatives to build the
foundation for growth under the creative direction of Nicola Glass
in FY19 and beyond.”
“Our first half results have clearly demonstrated the benefits
of our diversified multi-brand model, and our ability to invest in
talent and innovation. Overall, we remain focused on capitalizing
on the opportunities for Tapestry across all of our brands,
leveraging our successful experience in global business
development, brand-building and best-in-class supply chain. We
remain confident in our strategic vision and growth trajectory,”
Mr. Luis concluded.
Fiscal Year 2018 Outlook
The following fiscal 2018 guidance is provided on a non-GAAP
basis and includes projected Kate Spade results subsequent to the
closing of the transaction on July 11, 2017.
The Company continues to expect revenues for fiscal 2018 to
increase about 30% versus fiscal 2017, to $5.8 to $5.9 billion,
with low-single digit organic growth and the acquisition of Kate
Spade adding over $1.2 billion in revenue.
In addition, the Company continues to project operating income
growth of 22% to 25% versus fiscal 2017 driven by mid-single-digit
organic growth, the acquisition of Kate Spade, and estimated
synergies of $30 to $35 million. These synergies are expected to
offset in part the reduction in profitability from the strategic
and deliberate pullback of Kate Spade wholesale disposition and
online flash sales channels. Taken together, the Kate Spade
business and resulting synergies are expected to contribute
approximately $130 to $140 million to operating income.
Net interest expense is now expected to be $75 to $78 million
for the year, while the full year fiscal 2018 tax rate is projected
at about 19.5% to 21%. The changes from prior guidance is
reflective of the third quarter debt repayment of $1.1 billion and
the recent revisions to the U.S. tax code as noted above.
Overall, the Company now projects earnings per diluted share in
the range of $2.52-$2.60, an increase of about 17% to 21% for the
year, including mid-to-high single digit accretion from the
acquisition of Kate Spade.
Fiscal Year 2018 Outlook - Non-GAAP Disclosure:
The company is not able to provide a full reconciliation of the
non-GAAP financial measures to GAAP because certain material items
that impact these measures, such as the timing and exact amount of
charges related to our integration and acquisition related costs
and the Tax Legislation, 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 2018 guidance.
This fiscal 2018 non-GAAP guidance excludes (1) expected pre-tax
charges of around $10 million attributable to the Company’s
Operational Efficiency Plan; (2) estimated pre-tax Integration and
Acquisition charges of approximately $40 million related to
acquisition fees and approximately $240 to $250 million in
integration-related costs (of which approximately $120 to $130
million is estimated to be non-cash), primarily attributable to
Kate Spade as the Company continues to fully develop its
integration plan and; (3) an expected one-time increase in the
provision for taxes of approximately $213 million due to the
transition tax on foreign earnings deemed to be repatriated of
approximately $315 million and the re-measurement of deferred tax
assets and liabilities under the new U.S. tax code of approximately
$102 million. The actual amount of the re-measurement and deemed
repatriation tax may differ from this estimate due to, among other
factors, a change in interpretations of the applicable revisions to
the U.S. tax code, changes in assumptions made in developing these
estimates, as well as regulatory guidance that may be issued with
respect to the applicable revisions to the U.S. tax code.
For the six months ended December 30, 2017, the Company incurred
pre-tax charges of $7 million related to the Operational Efficiency
Plan, $40 million in acquisition fees and approximately $209
million in integration-related costs. The Company also incurred a
$194 million increase in provision for income taxes in the second
fiscal quarter due to transition charges related to a tax on
foreign earnings deemed to be repatriated and re-measurement of
deferred tax assets and liabilities under the new U.S. tax
code.
In fiscal 2018, the Company adopted Accounting Standard Update
(ASU) 2016-09 for the accounting of employee share-based payments,
which was issued by the Financial Accounting Standards Board.
This affects the Company’s effective tax rate as certain tax
impacts that were previously recorded to equity are now included in
income tax expense. Further, because the tax impacts are defined by
the company’s stock price when Restricted Stock Units (RSUs) and
Performance Restricted Stock Units (PRSUs) vest and when employees
exercise their stock options, the timing and the amount of the
impact cannot be forecasted.
Conference Call Details:
The Company will host a conference call to review these results
at 8:30 a.m. (ET) today, February 6, 2018. Interested parties may
listen to the webcast by accessing www.tapestry.com/investors on
the Internet or dialing into 1-877-510-8087 or 1-862-298-9015 and
providing the Conference ID 88865690. 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 88865690. A webcast
replay of the earnings conference call will also be available for
five business days on the Tapestry website.
The Company expects to report fiscal 2018 third quarter
financial results on Tuesday, May 1, 2018. 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. The Company’s Hong Kong Depositary Receipts are traded on The
Stock Exchange of Hong Kong Limited under the symbol 6388.
Neither the Hong Kong Depositary Receipts nor the Hong Kong
Depositary Shares evidenced thereby have been or will be registered
under the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered or sold in the United States or to,
or for the account of, a U.S. Person (within the meaning of
Regulation S under the Securities Act), absent registration or an
applicable exemption from the registration requirements. Hedging
transactions involving these securities may not be conducted unless
in compliance with the Securities Act.
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 “Tax Legislation,” “Fiscal Year
2018 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," “moving,”
“leveraging,” “capitalizing,” “developing,” “driving,” “targeting,”
“assume,” “plan,” “build,” “pursue,” “maintain,” “on track,” “well
positioned to drive,” “look forward to,” “to acquire,” “achieve,”
“strategic vision,” “growth trajectory” 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 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.
TAPESTRY,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters
and Six Months Ended December 30, 2017 and December 31,
2016
(in millions,
except per share data)
(unaudited) (unaudited) QUARTER ENDED
SIX MONTHS ENDED
December 30,2017
December 31,2016
December 30,2017
December 31,2016
Net sales
$ 1,785.0 $ 1,321.7 $ 3,073.9 $ 2,359.3 Cost of sales
607.6 415.5 1,132.1 738.4 Gross Profit
1,177.4 906.2 1,941.8 1,620.9 Selling, general and
administrative expenses 831.0 628.8 1,617.2
1,177.6 Operating income 346.4 277.4 324.6 443.3
Interest expense, net 22.2 5.1 42.7
10.8 Income before provision for income taxes 324.2
272.3 281.9 432.5 Provision for income taxes 261.0
72.6 236.4 115.4 Net income $ 63.2 $
199.7 $ 45.5 $ 317.1 Net income per share: Basic $
0.22 $ 0.71 $ 0.16 $ 1.13 Diluted $ 0.22 $ 0.71 $ 0.16 $
1.13 Shares used in computing net income per share:
Basic 284.5 280.5 283.8 279.9
Diluted 286.4 281.8 286.5 281.8
TAPESTRY,
INC.
GAAP TO NON-GAAP
RECONCILIATION
For the Six
Months Ended December 30, 2017 and December 31, 2016
(in millions,
except per share data)
(unaudited)
December 30, 2017
GAAP Basis(As Reported)
Operational Efficiency
Plan(1)
Integration
&Acquisition(2)
Impact of
TaxLegislation(3)
Non-GAAP Basis(Excluding
Items)
Gross profit $ 1,941.8 $ — $ (106.8 ) $ — $ 2,048.6
Selling, general and administrative expenses $ 1,617.2 $ 6.6 $
142.1 $ — $ 1,468.5 Operating income $ 324.6 $ (6.6 ) $
(248.9 ) $ — $ 580.1 Income before provision for income
taxes $ 281.9 $ (6.6 ) $ (248.9 ) $ — $ 537.4 Provision for
income taxes $ 236.4 $ (2.1 ) $ (67.2 ) $ 194.2 $ 111.5 Net
income $ 45.5 $ (4.5 ) $ (181.7 ) $ (194.2 ) $ 425.9 Diluted
net income per share $ 0.16 $ (0.02 ) $ (0.63 ) $ (0.68 ) $ 1.49
December 31,
2016
GAAP Basis(As Reported)
Operational Efficiency
Plan(1)
Integration
&Acquisition(2)
Non-GAAP Basis(Excluding
Items)
Gross profit $ 1,620.9 $ — $ (0.6 ) $ 1,621.5
Selling, general and administrative expenses $ 1,177.6 $ 10.8 $
16.4 $ 1,150.4 Operating income $ 443.3 $ (10.8 ) $ (17.0 )
$ 471.1 Income before provision for income taxes $ 432.5 $
(10.8 ) $ (17.0 ) $ 460.3 Provision for income taxes $ 115.4
$ (2.7 ) $ (5.0 ) $ 123.1 Net income $ 317.1 $ (8.1 ) $
(12.0 ) $ 337.2 Diluted net income per share $ 1.13 $ (0.03
) $ (0.04 ) $ 1.20 (1) Amounts as of December 30, 2017
represent technology infrastructure and organizational efficiency
costs. Amounts as of December 31, 2016 represent charges primarily
related to organizational efficiency costs, technology
infrastructure costs and to a lesser extent, network optimization
costs. (2) Amounts as of December 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 -
Professional fees - Severance and other costs related to
contractual payments with certain Kate Spade executives - Inventory
reserves established for the destruction of inventory -
Organizational costs as a result of integration Amounts as
of December 31, 2016 represent charges attributable to acquisition
costs and limited life purchase accounting impacts related to the
acquisition of Stuart Weitzman Holdings LLC. (3) Amounts as
of December 30, 2017 represent charges due to the transition tax
related to foreign earnings deemed to be repatriated and the
re-measurement of deferred tax assets and liabilities.
TAPESTRY,
INC.
GAAP TO NON-GAAP
RECONCILIATION
For the Six
Months Ended December 30, 2017 and December 31, 2016
(in millions,
except per share data)
(unaudited)
December 30, 2017
GAAP Basis(As Reported)
Operational Efficiency
Plan(1)
Integration
&Acquisition(2)
Impact of
TaxLegislation(3)
Non-GAAP Basis(Excluding
Items)
Gross profit $ 1,941.8 $ — $ (106.8 ) $ — $ 2,048.6
Selling, general and administrative expenses $ 1,617.2 $ 6.6 $
142.1 $ — $ 1,468.5 Operating income $ 324.6 $ (6.6 ) $
(248.9 ) $ — $ 580.1 Income before provision for income
taxes $ 281.9 $ (6.6 ) $ (248.9 ) $ — $ 537.4 Provision for
income taxes $ 236.4 $ (2.1 ) $ (67.2 ) $ 194.2 $ 111.5 Net
income $ 45.5 $ (4.5 ) $ (181.7 ) $ (194.2 ) $ 425.9 Diluted
net income per share $ 0.16 $ (0.02 ) $ (0.63 ) $ (0.68 ) $ 1.49
December 31,
2016
GAAP Basis(As Reported)
Operational Efficiency
Plan(1)
Integration
&Acquisition(2)
Non-GAAP Basis(Excluding
Items)
Gross profit $ 1,620.9 $ — $ (0.6 ) $ 1,621.5
Selling, general and administrative expenses $ 1,177.6 $ 10.8 $
16.4 $ 1,150.4 Operating income $ 443.3 $ (10.8 ) $ (17.0 )
$ 471.1 Income before provision for income taxes $ 432.5 $
(10.8 ) $ (17.0 ) $ 460.3 Provision for income taxes $ 115.4
$ (2.7 ) $ (5.0 ) $ 123.1 Net income $ 317.1 $ (8.1 ) $
(12.0 ) $ 337.2 Diluted net income per share $ 1.13 $
(0.03 ) $ (0.04 ) $ 1.20 (1) Amounts as of December 30, 2017
represent technology infrastructure and organizational efficiency
costs. Amounts as of December 31, 2016 represent charges primarily
related to organizational efficiency costs, technology
infrastructure costs and to a lesser extent, network optimization
costs. (2) Amounts as of December 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 -
Professional fees - Severance and other costs related to
contractual payments with certain Kate Spade executives - Inventory
reserves established for the destruction of inventory -
Organizational costs as a result of integration Amounts as
of December 31, 2016 represent charges attributable to acquisition
costs and limited life purchase accounting impacts related to the
acquisition of Stuart Weitzman Holdings LLC. (3) Amounts as
of December 30, 2017 represent charges due to the transition tax
related to foreign earnings deemed to be repatriated and the
re-measurement of deferred tax assets and liabilities.
TAPESTRY,
INC.
GAAP TO NON-GAAP
RECONCILIATION - FOR SEGMENT RESULTS
For the Quarters
Ended December 30, 2017 and December 31, 2016
(in
millions)
(unaudited)
December 30, 2017 GAAP Coach
Kate Spade
StuartWeitzman
Corporate Non-GAAP COGS Integration &
Acquisition — (17.0 ) (1.4 ) —
Gross profit $ 1,177.4 $ — $ (17.0 ) $ (1.4 )
$ — $ 1,195.8
SG&A Integration &
Acquisition — 29.7 0.9 12.4 Operational Efficiency Plan
— — — 3.5
SG&A $ 831.0 $ — $ 29.7 $ 0.9 $ 15.9
$ 784.5
Operating income $ 346.4 $ — $ (46.7 )
$ (2.3 ) $ (15.9 ) $ 411.3
December 31, 2016
GAAP Coach Kate Spade
StuartWeitzman
Corporate Non-GAAP COGS Integration &
Acquisition — — (0.2 ) —
Gross profit $ 906.2 $ — $ — $ (0.2 ) $
— $ 906.4
SG&A Integration &
Acquisition — — 10.0 3.0 Operational Efficiency Plan
— — — 3.7
SG&A $ 628.8 $ — $ — $ 10.0 $ 6.7 $
612.1
Operating income $ 277.4 $ — $ — $ (10.2
) $ (6.7 ) $ 294.3
TAPESTRY,
INC.
GAAP TO NON-GAAP
RECONCILIATION - FOR SEGMENT RESULTS
For the Six
Months Ended December 30, 2017 and December 31, 2016
(in
millions)
(unaudited)
December 30, 3017 GAAP Coach
Kate Spade(1)
StuartWeitzman
Corporate Non-GAAP COGS Integration &
Acquisition — (105.4 ) (1.4 ) —
Gross profit $ 1,941.8 $ — $ (105.4 ) $ (1.4 )
$ — $ 2,048.6
SG&A Integration &
Acquisition — 97.5 1.8 42.8 Operational Efficiency Plan
— — — 6.6
SG&A $ 1,617.2 $ — $ 97.5 $ 1.8 $ 49.4
$ 1,468.5
Operating income $ 324.6 $ — $
(202.9 ) $ (3.2 ) $ (49.4 ) $ 580.1
December 31,
2016 GAAP Coach Kate Spade
StuartWeitzman
Corporate Non-GAAP COGS Integration &
Acquisition — — (0.6 ) —
Gross profit $ 1,620.9 $ — $ — $ (0.6 )
$ — $ 1,621.5
SG&A Integration &
Acquisition — — 11.0 5.4 Operational Efficiency Plan
— — — 10.8
SG&A $ 1,177.6 $ — $ — $ 11.0 $ 16.2
$ 1,150.4
Operating income $ 443.3 $ — $ —
$ (11.6 ) $ (16.2 ) $ 471.1 (1) On July 11, 2017, the
Company completed its acquisition of Kate Spade. The operating
results of the Kate Spade brand have been consolidated in the
Company's operating results commencing on July 11, 2017.
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 our Operational
Efficiency Plan, Integration & Acquisition-Related Costs and
the impact of Tax Legislation 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 the Coach
brand 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 period’s monthly average currency conversion
rate.
Guidance for certain financial information for the fiscal year
ending June 30, 2018 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.
Segment
Information
For the Quarters
and Six Months Ended December 30, 2017 and December 31,
2016
(in
millions)
(unaudited)
Coach Kate
Spade(1)
StuartWeitzman
Corporate Total
Three Months
Ended December 30, 2017
Net sales $ 1,229.6 $ 434.7 $ 120.7 $ — $ 1,785.0 Gross
profit 846.0 258.0 73.4 — 1,177.4 Operating income (loss) 361.2
45.3 21.3 (81.4 ) 346.4 Income (loss) before provision for income
taxes 361.2 45.3 21.3 (103.6 ) 324.2
Three Months
Ended December 31, 2016
Net sales $ 1,203.4 $ — $ 118.3 $ — $ 1,321.7 Gross profit
830.2 — 76.0 — 906.2 Operating income (loss) 338.7 — 12.0 (73.3 )
277.4 Income (loss) before provision for income taxes 338.7 — 12.0
(78.4 ) 272.3
Six Months Ended
December 30, 2017
Net sales $ 2,153.3 $ 703.5 $ 217.1 $ — $ 3,073.9 Gross
profit 1,478.1 334.3 129.4 — 1,941.8 Operating income (loss) 559.5
(89.6 ) 29.7 (175.0 ) 324.6 Income (loss) before provision for
income taxes 559.5 (89.6 ) 29.7 (217.7 ) 281.9
Six Months Ended
December 31, 2016
Net sales $ 2,153.5 $ — $ 205.8 $ — $ 2,359.3 Gross profit
1,493.8 — 127.1 — 1,620.9 Operating income (loss) 571.0 — 15.9
(143.6 ) 443.3 Income (loss) before provision for income taxes
571.0 — 15.9 (154.4 ) 432.5 (1) On July 11, 2017, the
Company completed its acquisition of Kate Spade. The operating
results of the Kate Spade brand have been consolidated in the
Company's operating results commencing on July 11, 2017.
TAPESTRY,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
At December 30,
2017, July 1, 2017 and December 31, 2016
(in
millions)
(unaudited) (audited) (unaudited)
December 30,2017
July 1,2017
December 31,2016
ASSETS Cash, cash equivalents and short-term
investments $ 2,091.8 $ 3,083.6 $ 1,835.9 Receivables 347.8 268.0
269.6 Inventories 666.2 469.7 464.9 Other current assets
176.5 132.0 195.3 Total current assets 3,282.3
3,953.3 2,765.7 Property and equipment, net 877.0 691.4
641.2 Other noncurrent assets 3,321.9 1,186.9
1,271.8 Total assets $ 7,481.2 $ 5,831.6 $ 4,678.7
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable
$ 234.8 $ 194.6 $ 152.5 Accrued liabilities 696.0 559.2 562.7
Current debt 800.6 — — Total current
liabilities 1,731.4 753.8 715.2 Long-term debt 1,887.5
1,579.5 591.6 Other liabilities 912.9 496.4 560.8
Stockholders' equity 2,949.4 3,001.9 2,811.1
Total liabilities and stockholders' equity $ 7,481.2 $
5,831.6 $ 4,678.7
TAPESTRY,
INC.
Store
Count
At September 30,
2017 and December 30, 2017
(unaudited) As of As of
Directly-Operated
Store Count:
September 30,
2017
Openings
(Closures)
December 30,
2017
Coach
North America 417 3 (4) 416 International 543 13 (5) 551
Kate
Spade
North America 183 7 (1) 189 International 93 2 — 95
Stuart
Weitzman
North America 69 1 — 70 International 12 1 — 13
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180206005392/en/
Tapestry, Inc.Analysts & Media:Andrea Shaw Resnick,
212-629-2618Global Head of Investor Relations and Corporate
CommunicationsorChristina Colone, 212-946-7252Senior Director,
Investor Relations
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