- Net Sales Increased 33% Driven by
the Acquisition of Kate Spade and Organic Growth
- EPS Rose 12% on a GAAP Basis to
$0.48 and 18% on a Non-GAAP Basis to $0.54
Tapestry, Inc. (NYSE:TPR), a leading New York-based house of
modern luxury accessories and lifestyle brands, today reported
third quarter results for the period ended March 31, 2018.
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Victor Luis, Chief Executive Officer of Tapestry, Inc., said
“Our solid third quarter performance was consistent with our
expectations, as we achieved double-digit increases in sales and
earnings per share. Results were driven by continued growth at
Coach, where comparable store sales rose, led by outperformance in
North America, and reflected our strong offering, including the
successful global relaunch of Signature in retail. We leveraged
these sales gains, tightly controlling costs, and delivered
operating income growth ahead of the top line increase.”
“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 to announce the
appointment of Anna Bakst as CEO and Brand President, Kate Spade
who officially joined us in late March. Together with Creative
Director Nicola Glass, we now have the leadership team in place to
drive the brand forward globally.”
“At Stuart Weitzman, results were negatively impacted by
execution issues including production delays and lower sell-through
of key carryover styles, which pressured sales and margins. While
we believe that some of these issues will continue through the
Fall/Winter season, we remain confident in our long-term strategic
and creative direction under the leadership of newly appointed CEO
& Brand President, Eraldo Poletto and Creative Director,
Giovanni Morelli.”
“During the quarter, we completed the buybacks of the Coach
business in Australia and New Zealand as well as the Stuart
Weitzman business in Northern China, while also taking operational
control of the Kate Spade joint ventures for Mainland China, Hong
Kong, Macau and Taiwan. As we’ve demonstrated with our past
experiences, we believe that controlling these businesses directly
allows us to accelerate international growth and enhance each
brand’s development in these markets.”
Third Quarter 2018 Non-GAAP
Reconciliation Items:
During the quarter, the Company recorded certain charges
associated with Integration and Acquisition activities, Tax
Legislation, and its Operational Efficiency Plan. Taken together,
these items decreased the Company’s reported net income by $18
million or about $0.06 per diluted share. Please refer to the
financial tables included herein for a detailed reconciliation of
our reported to non-GAAP results.
Overview of Third Quarter 2018
Tapestry, Inc. Results:
Fiscal 2018 third 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 $1.32 billion
for the third fiscal quarter as compared to $995 million in the
prior year, an increase of 33% on reported basis. On a constant
currency basis, total sales increased 30%.
- Gross profit totaled $909
million on a reported basis, while gross margin for the quarter was
68.7% on a reported basis compared to 70.9% in the prior year. On a
non-GAAP basis, gross profit totaled $913 million, while gross
margin was 69.0% as compared to 70.9% in the prior year.
- SG&A expenses totaled $750
million on a reported basis and represented 56.7% of sales compared
to 55.7% in the year-ago quarter. On a non-GAAP basis, SG&A
expenses were $729 million and represented 55.1% of sales as
compared to 54.6% in the year-ago period.
- Operating income for the quarter
was $159 million on a reported basis, while operating margin was
12.0% versus 15.2% in the prior year. On a non-GAAP basis,
operating income was $184 million, an increase of 14% versus prior
year, while operating margin was 13.9% versus 16.3% in last year’s
third quarter.
- Net interest expense was $17
million in the quarter as compared to $4 million in the year ago
period.
- Net income for the quarter was
$140 million on a reported basis, with earnings per diluted share
of $0.48. This compared to reported net income of $122 million with
earnings per diluted share of $0.43 in the prior year period. On a
non-GAAP basis, net income for the quarter totaled $158 million,
with earnings per diluted share of $0.54. This compared to non-GAAP
net income of $130 million with earnings per diluted share of $0.46
in the prior year period. The tax rate for the quarter was 1.3% and
5.6% on a reported and non-GAAP basis, respectively, reflective of
the impact of the tax legislation changes, as previously disclosed,
as well as the adoption of Accounting Standards Update (ASU)
2016-09 for the accounting of employee share-based payments which
cannot be forecasted. This compared to a tax rate of 16.9% and
17.5% in the prior year on a reported and non-GAAP basis,
respectively.
- Inventory was $714 million at
the end of quarter versus ending inventory of $479 million in the
year ago period. Excluding the impact of Kate Spade as well as the
inventory associated with regional buyback activity in the quarter,
total inventory increased 7% versus prior year, consistent with
organic sales growth.
Third fiscal quarter results in each of the Company’s reportable
segments were as follows:
Coach Third Quarter of 2018
Results:
- Net sales for Coach totaled $969
million for the third fiscal quarter as compared to $915 million in
the prior year, an increase of 6% on a reported basis and 3% on a
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
$691 million on a reported basis, while gross margin for the
quarter was 71.3%. On a non-GAAP basis, gross profit totaled $692
million, while gross margin was 71.4%, including a benefit of
approximately 50 basis points from currency. This compared to gross
margin of 71.7% in the prior year period on both a reported and
non-GAAP basis.
- SG&A expenses totaled $450
million for Coach on a reported and non-GAAP basis. SG&A
expenses represented 46.5% and 46.4% of sales on a reported and
non-GAAP basis, respectively, compared to 47.3% in the year-ago
quarter on a reported and non-GAAP basis.
- Operating income for Coach was
$241 million on a reported basis, while operating margin was 24.9%.
On a non-GAAP basis, operating income was $242 million, while
operating margin was 25.0%. This compared to operating margin of
24.4% in the prior year, both on a reported and non-GAAP
basis.
Kate Spade Third Quarter of 2018
Results:
- Net sales for Kate Spade totaled
$269 million, reflecting, in part, the strategic pullback in
wholesale disposition and online flash sales, partially offset by
the consolidation of the joint ventures for Mainland China, Hong
Kong, Macau and Taiwan. Global comparable store sales declined 9%,
including the negative impact of approximately 800 basis points
from a decline in global e-commerce.
- Gross profit for
Kate Spade totaled $172 million on a reported basis, while gross
margin for the period was 64.0%. On a non-GAAP basis, gross profit
was $173 million, while gross margin was 64.3%.
- SG&A expenses for Kate Spade
were $169 million on a reported basis and represented 62.6% of
sales. On a non-GAAP basis, SG&A expenses were $159 million and
represented 59.2% of sales.
- Operating income for Kate Spade
was $4 million on a reported basis, representing an operating
margin of 1.4%. On a non-GAAP basis, operating income totaled $14
million, while operating margin was 5.1%.
Stuart Weitzman Third Quarter of 2018
Results:
- Net sales for Stuart Weitzman
totaled $84 million for the third fiscal quarter compared to $80
million reported in the same period of the prior year, an increase
of 5%.
- Gross profit for Stuart Weitzman
totaled $45 million on a reported basis, while gross margin for the
quarter was 54.1% on a reported basis compared to 62.1% in the
prior year. On a non-GAAP basis, gross profit totaled $47 million,
while gross margin was 56.6% as compared to 62.1% in the prior
year.
- SG&A expenses for Stuart
Weitzman were $57 million on a reported basis and represented 68.0%
of sales as compared to 58.9% of sales in the prior year’s third
quarter. On a non-GAAP basis, SG&A expenses were $52 million or
62.4% of sales as compared to 56.7% of sales in the prior
year.
- Operating income for Stuart
Weitzman was a loss of $12 million on a reported basis, while
operating margin was (13.9)% versus 3.2% in the prior year. On a
non-GAAP basis, operating income was a loss of $5 million or (5.8)%
of sales versus 5.3% in the prior year.
Mr. Luis added, “As we look forward to the balance of our fiscal
year and into 2019, we are excited about the growth opportunities
for Tapestry and reaping the continued benefits of a diversified,
multi-brand model. At Coach, we look forward to cascading the
innovation from the runway across channels and price points. We’re
particularly pleased to announce an expanded collaboration with
Selena Gomez for Fall, which will extend to ready-to-wear. At Kate
Spade, while our near-term priority remains integration and
executing the strategic initiatives in place, we look forward to
fueling growth in the years ahead through Nicola’s fresh, new
creative direction and Anna’s extensive category experience.
Similarly, we believe in Stuart Weitzman’s potential, as we evolve
the product assortment, infusing it with Giovanni’s modern design
aesthetic, while strengthening the brand’s infrastructure under
Eraldo’s leadership.”
“With strong and seasoned brand teams in place, Tapestry is well
positioned to continue its journey as a global house of brands and
to focus on opportunities to drive long-term and sustainable
growth,” 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 is now projecting operating income
growth of at least 22% versus fiscal 2017 driven by
mid-single-digit organic growth, the acquisition of Kate Spade, and
estimated synergies of approximately $45 million. These synergies
are expected to offset 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 $145 million to operating income.
Net interest expense is now expected to be approximately $75
million for the year, while the full year fiscal 2018 tax rate is
now projected at about 18% to 19%.
Overall, the Company now projects earnings per diluted share in
the range of $2.57-$2.60, an increase of about 19% to 21% for the
year, including 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 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 $15 million attributable to the Company’s
Operational Efficiency Plan; (2) estimated pre-tax Integration and
Acquisition charges of approximately $45 million related to
acquisition fees and approximately $250 to $260 million in
integration-related costs (of which approximately $130 to $135
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 $215 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
$100 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 nine months ended March 31, 2018, the Company incurred
pre-tax charges of $10 million related to the Operational
Efficiency Plan, $42 million in acquisition fees and $229 million
in integration-related costs. The Company also incurred a $200
million increase in provision for income taxes 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 Standards 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.
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”).
Conference Call Details:
The Company will host a conference call to review these results
at 8:30 a.m. (ET) today, May 1, 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 88865691. 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 88865691. 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 fourth quarter and
year-end financial results on Tuesday, August 14, 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.
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 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,” “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 impact of tax legislation, etc. Please refer to the Company’s
latest Annual Report on Form 10-K, it’s Quarterly Report on Form
10-Q for the period ended December 31, 2017 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.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters
and Nine Months Ended March 31, 2018 and April 1,
2017
(in millions,
except per share data)
(unaudited) (unaudited) QUARTER ENDED
NINE MONTHS ENDED March 31,
2018
April 1,
2017
March 31,
2018
April 1,
2017
Net sales $ 1,322.4 $ 995.2 $ 4,396.3 $ 3,354.5 Cost
of sales 413.5 289.5 1,545.6 1,027.9
Gross Profit 908.9 705.7 2,850.7 2,326.6 Selling,
general and administrative expenses 749.9 554.6
2,367.1 1,732.2 Operating income 159.0 151.1
483.6 594.4 Interest expense, net 16.9 4.0
59.6 14.8 Income before provision for income
taxes 142.1 147.1 424.0 579.6 Provision for income taxes
1.8 24.9 238.2 140.3 Net income
$ 140.3 $ 122.2 $ 185.8 $ 439.3 Net income per share:
Basic $ 0.49 $ 0.44 $ 0.65 $ 1.57 Diluted $ 0.48 $ 0.43 $
0.65 $ 1.56 Shares used in computing net income per share:
Basic 286.2 280.8 284.7 280.2
Diluted 290.1 282.9 287.8 282.2
TAPESTRY,
INC.
GAAP TO NON-GAAP
RECONCILIATION
For the Quarters
Ended March 31, 2018 and April 1, 2017
(in millions,
except per share data)
(unaudited)
March 31, 2018
GAAP Basis (As Reported)
Operational Efficiency
Plan(1)
Integration &
Acquisition(2)
Impact of Tax
Legislation(3)
Non-GAAP Basis (Excluding
Items)
Gross profit $ 908.9 $ — $ (4.1 ) $ — $ 913.0
Selling, general and administrative expenses $ 749.9 $ 2.9 $ 18.3 $
— $ 728.7 Operating income $ 159.0 $ (2.9 ) $ (22.4 ) $ — $
184.3 Income before provision for income taxes $ 142.1 $
(2.9 ) $ (22.4 ) $ — $ 167.4 Provision for income taxes $
1.8 $ (1.0 ) $ (12.1 ) $ 5.4 $ 9.5 Net income $ 140.3 $ (1.9
) $ (10.3 ) $ (5.4 ) $ 157.9 Diluted net income per share $
0.48 $ — $ (0.04 ) $ (0.02 ) $ 0.54
April 1, 2017
GAAP Basis (As Reported)
Operational
Efficiency Plan(1)
Integration &
Acquisition(2)
Non-GAAP Basis (Excluding
Items)
Gross profit $ 705.7 $ — $ —
$
705.7
Selling, general and administrative expenses $ 554.6 $ 6.4 $
4.5 $ 543.7 Operating income $ 151.1 $ (6.4 ) $ (4.5 ) $
162.0 Income before provision for income taxes $ 147.1 $
(6.4 ) $ (4.5 ) $ 158.0 Provision for income taxes $ 24.9 $
(1.6 ) $ (1.2 ) $ 27.7 Net income $ 122.2 $ (4.8 ) $ (3.3 )
$ 130.3 Diluted net income per share $ 0.43 $ (0.02 ) $
(0.01 ) $ 0.46 (1) Amounts as of March 31, 2018 represent
technology infrastructure costs. Amounts as of April 1, 2017
represent charges primarily related to organizational efficiency
and technology infrastructure costs. (2) Amounts as of March
31, 2018 represent charges attributable to acquisition and
integration costs related to the purchase of Kate Spade &
Company, the acquisition of certain distributors for the Coach and
Stuart Weitzman brands and assumed operational control of Kate
Spade joint ventures. These charges include:
- Organizational costs as a result of
integration
- Limited life purchase accounting
adjustments
- Professional fees
Amounts as of April 1, 2017 represent acquisition costs and
integration-related activities related to the acquisition of Stuart
Weitzman Holdings LLC. (3) Amounts as of March 31, 2018 represent
charges due to the transition tax related to foreign earnings
deemed to be repatriated partially offset by the re-measurement of
deferred tax assets and liabilities.
TAPESTRY,
INC.
GAAP TO NON-GAAP
RECONCILIATION
For the Nine
Months Ended March 31, 2018 and April 1, 2017
(in millions,
except per share data)
(unaudited)
March 31, 2018
GAAP Basis (As Reported)
Operational Efficiency
Plan(1)
Integration &
Acquisition(2)
Impact of Tax
Legislation(3)
Non-GAAP Basis (Excluding
Items)
Gross profit $ 2,850.7 $ — $ (110.9 ) $ — $ 2,961.6
Selling, general and administrative expenses $ 2,367.1 $ 9.5 $
160.4 $ — $ 2,197.2 Operating income $ 483.6 $ (9.5 ) $
(271.3 ) $ — $ 764.4 Income before provision for income
taxes $ 424.0 $ (9.5 ) $ (271.3 ) $ — $ 704.8 Provision for
income taxes $ 238.2 $ (3.1 ) $ (79.3 ) $ 199.6 $ 121.0 Net
income $ 185.8 $ (6.4 ) $ (192.0 ) $ (199.6 ) $ 583.8
Diluted net income per share $ 0.65 $ (0.02 ) $ (0.67 ) $ (0.69 ) $
2.03
April 1,
2017
GAAP Basis (As Reported)
Operational Efficiency
Plan(1)
Integration &
Acquisition(2)
Non-GAAP Basis (Excluding
Items)
Gross profit $ 2,326.6 $ — $ (0.6 ) $ 2,327.2
Selling, general and administrative expenses $ 1,732.2 $ 17.2 $
20.9 $ 1,694.1 Operating income $ 594.4 $ (17.2 ) $ (21.5 )
$ 633.1 Income before provision for income taxes $ 579.6 $
(17.2 ) $ (21.5 ) $ 618.3 Provision for income taxes $ 140.3
$ (4.3 ) $ (6.2 ) $ 150.8 Net income $ 439.3 $ (12.9 ) $
(15.3 ) $ 467.5 Diluted net income per share $ 1.56 $ (0.05
) $ (0.05 ) $ 1.66 (1) Amounts as of March 31, 2018 primarily
represent technology infrastructure costs. Amounts as of April 1,
2017 represent charges primarily related to organizational
efficiency costs, technology infrastructure costs and to a lesser
extent, network optimization costs. (2) Amounts as of March
31, 2018 represent charges attributable to acquisition and
integration costs related to the purchase of Kate Spade &
Company, and to a lesser extent the acquisition of certain
distributors for the Coach and Stuart Weitzman brands and assumed
operational control of Kate Spade joint ventures. These charges
include:
- Limited life purchase accounting
adjustments
- Professional fees
- Severance and other costs related to
contractual payments with certain Kate Spade executives
- Organizational costs as a result of
integration
- Inventory reserves established for the
destruction of inventory
Amounts as of April 1, 2017 represent acquisition costs and
limited life purchase accounting impacts related to the acquisition
of Stuart Weitzman Holdings LLC. (3) Amounts as of March 31, 2018
represent charges due to the transition tax related to foreign
earnings deemed to be repatriated partially offset by the
re-measurement of deferred tax assets and liabilities.
TAPESTRY,
INC.
GAAP TO NON-GAAP
RECONCILIATION - FOR SEGMENT RESULTS
For the Quarters
Ended March 31, 2018 and April 1, 2017
(in
millions)
(unaudited)
March 31, 2018 GAAP
Coach(1) Kate Spade(1)
Stuart
Weitzman(1)
Corporate Non-GAAP COGS Integration &
Acquisition (1.0 ) (1.0 ) (2.1 )
—
Gross profit $ 908.9 $ (1.0 ) $ (1.0 ) $
(2.1 ) $ — $ 913.0
SG&A Integration &
Acquisition 0.2 9.1 4.7 4.3 Operational Efficiency Plan
— — — 2.9
SG&A $ 749.9 $ 0.2 $ 9.1 $ 4.7
$ 7.2 $ 728.7
Operating income $ 159.0
$ (1.2 ) $ (10.1 ) $ (6.8 ) $ (7.2 ) $ 184.3
April 1,
2017 GAAP Coach Kate Spade
Stuart Weitzman
Corporate Non-GAAP COGS Integration &
Acquisition — — —
—
Gross profit $ 705.7 $ — $ —
$ — $ —
$
705.7
SG&A Integration & Acquisition — — 1.7
2.8 Operational Efficiency Plan — —
— 6.4
SG&A $
554.6 $ — $ — $ 1.7 $ 9.2 $ 543.7
Operating income $ 151.1 $ — $ — $ (1.7
) $ (9.2 ) $ 162.0 (1) During the third quarter of fiscal 2018, the
Company completed its acquisition of certain distributors for the
Coach and Stuart Weitzman brands and assumed operational control of
Kate Spade joint ventures. The operating results of the respective
entity have been consolidated in the Company's operating results
commencing on the date of each acquisition.
TAPESTRY,
INC.
GAAP TO NON-GAAP
RECONCILIATION - FOR SEGMENT RESULTS
For the Nine
Months Ended March 31, 2018 and April 1, 2017
(in
millions)
(unaudited)
March 31, 2018 GAAP
Coach(1) Kate Spade(1)
Stuart
Weitzman(1)
Corporate Non-GAAP COGS Integration &
Acquisition (1.0 ) (106.4 ) (3.5 )
—
Gross profit $ 2,850.7 $ (1.0 ) $
(106.4 ) $ (3.5 ) $ — $ 2,961.6
SG&A
Integration & Acquisition 0.2 106.6 6.5 47.1 Operational
Efficiency Plan — — —
9.5
SG&A $ 2,367.1 $ 0.2
$ 106.6 $ 6.5 $ 56.6 $ 2,197.2
Operating income $ 483.6 $ (1.2 ) $ (213.0 ) $ (10.0 ) $
(56.6 ) $ 764.4
April 1, 2017 GAAP
Coach Kate Spade
Stuart Weitzman
Corporate Non-GAAP COGS Integration &
Acquisition — — (0.6 )
—
Gross profit $ 2,326.6 $ — $ —
$ (0.6 ) $ — $ 2,327.2
SG&A
Integration & Acquisition — — 12.7 8.2 Operational Efficiency
Plan — — —
17.2
SG&A $ 1,732.2 $ — $ —
$ 12.7 $ 25.4 $ 1,694.1
Operating
income $ 594.4 $ — $ — $ (13.3 ) $ (25.4 ) $
633.1 (1) During the first quarter of fiscal 2018, the Company
completed its acquisition of Kate Spade & Company. During the
third quarter of fiscal 2018, the Company completed its acquisition
of certain distributors for the Coach and Stuart Weitzman brands
and assumed operational control of Kate Spade joint ventures. The
operating results of the respective entity have been consolidated
in the Company's operating results commencing on the date of each
acquisition.
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 Nine Months Ended March 31, 2018 and April 1,
2017
(in
millions)
(unaudited)
Coach(1) Kate Spade(1)
Stuart
Weitzman(1)
Corporate Total
Three Months
Ended March 31, 2018
Net sales $ 969.3 $ 269.3 $ 83.8 $ — $ 1,322.4 Gross profit
691.3 172.3 45.3 — 908.9 Operating income (loss) 240.9 3.8 (11.6 )
(74.1 ) 159.0 Income (loss) before provision for income taxes 240.9
3.8 (11.6 ) (91.0 ) 142.1
Three Months
Ended April 1, 2017
Net sales $ 915.3 $ — $ 79.9 $ — $ 995.2 Gross profit 656.1
— 49.6 — 705.7 Operating income (loss) 222.9 — 2.5 (74.3 ) 151.1
Income (loss) before provision for income taxes 222.9 — 2.5 (78.3 )
147.1
Nine Months Ended
March 31, 2018
Net sales $ 3,122.6 $ 972.8 $ 300.9 $ — $ 4,396.3 Gross
profit 2,169.4 506.6 174.7 — 2,850.7 Operating income (loss) 800.4
(85.8 ) 18.1 (249.1 ) 483.6 Income (loss) before provision for
income taxes 800.4 (85.8 ) 18.1 (308.7 ) 424.0
Nine Months Ended
April 1, 2017
Net sales $ 3,068.8 $ — $ 285.7 $ — $ 3,354.5 Gross profit
2,149.9 — 176.7 — 2,326.6 Operating income (loss) 793.9 — 18.4
(217.9 ) 594.4 Income (loss) before provision for income taxes
793.9 — 18.4 (232.7 ) 579.6 (1) During the first quarter of fiscal
2018, the Company completed its acquisition of Kate Spade &
Company. During the third quarter of fiscal 2018, the Company
completed its acquisition of certain distributors for the Coach and
Stuart Weitzman brands and assumed operational control of Kate
Spade joint ventures. The operating results of the respective
entity have been consolidated in the Company's operating results
commencing on the date of each acquisition.
TAPESTRY,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
At March 31,
2018, July 1, 2017 and April 1, 2017
(in
millions)
(unaudited) (audited) (unaudited)
March 31,
2018
July 1,
2017
April 1,
2017
ASSETS Cash, cash equivalents and short-term
investments $ 1,038.3 $ 3,083.6 $ 1,891.9 Receivables 292.3 268.0
203.4 Inventories 714.3 469.7 478.7 Other current assets
243.4 132.0 195.6 Total current assets 2,288.3
3,953.3 2,769.6 Property and equipment, net 889.4 691.4
661.2 Other noncurrent assets 3,410.3 1,186.9
1,230.2 Total assets $ 6,588.0 $ 5,831.6 $ 4,661.0
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable
$ 221.9 $ 194.6 $ 129.2 Accrued liabilities 637.5 559.2 507.1
Current debt 0.7 — — Total current
liabilities 860.1 753.8 636.3 Long-term debt 1,599.5 1,579.5
591.8 Other liabilities 990.4 496.4 541.0 Stockholders'
equity 3,138.0 3,001.9 2,891.9 Total
liabilities and stockholders' equity $ 6,588.0 $ 5,831.6 $ 4,661.0
TAPESTRY,
INC.
STORE
COUNT
At December 30,
2017 and March 31, 2018
(unaudited)
As of Acquired As of
Directly-Operated
Store Count:
December 30,
2017
Stores
Openings
(Closures)
March 31,
2018
Coach
North America 416 — — (11) 405 International 551 21 8 (5) 575
Kate
Spade
North America 189 — 7 (8) 188 International 95 50 2 (3) 144
Stuart
Weitzman
North America 70 — — — 70 International 13 20 — — 33
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180501005434/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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