Board Declares Quarterly Dividend
Company Plans to Return Approximately $700
Million in Capital to Shareholders Through Share Repurchase and
Dividend Programs in Fiscal 2020
Tapestry, Inc. (NYSE: TPR), a leading New York-based house of
modern luxury accessories and lifestyle brands, today reported
results for the fiscal fourth quarter and year ended June 29,
2019.
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Victor Luis, Chief Executive Officer of Tapestry, Inc., said,
“Fiscal 2019 was a year of meaningful evolution for Tapestry. We
experienced ongoing strength in our business internationally, while
navigating a volatile backdrop in North America. Importantly, we
made significant progress on our strategic initiatives, most
notably building the foundation of our distinctive multi-brand
platform. We generated the anticipated synergies from the
successful integration of Kate Spade into our portfolio, which
funded, in part, material investments in systems as well as our
international development through distributor acquisitions and new
store openings in key regions. We also made key additions to
Tapestry’s leadership team. Taken together, we believe these
actions will underpin our near and long term growth
objectives.”
“Coach - our largest and most globally diversified brand - had a
strong year, driven by growth in our international and digital
channels, while outperforming the direct competition in North
America. We understand that driving sustainable growth at Coach is
essential to the success of Tapestry overall and are proud of the
brand’s performance, highlighted by seven consecutive quarters of
positive comparable store sales.”
“In addition, we made important advancements at Stuart Weitzman,
across people, processes and product to address the challenges in
the business, driving a return to topline growth in Fiscal 2019.
We’ve also successfully expanded the brand internationally through
regional distributor acquisitions and new store openings, with a
focus on China, where we are just beginning to tap into this
tremendous growth opportunity for the brand.”
“At Kate Spade, the most significant milestone of the year was
the debut of Nicola Glass’s creative vision, reimagining the brand
while staying true to its unique positioning, heritage and DNA. We
are incredibly confident in this vision, supported by the emerging
positive signs we are seeing, notably in the new brand codes and
evolved product in the full price business. That said, the brand’s
financial results did not meet our expectations and more time is
required to drive a positive inflection in the business,
particularly in light of the traffic-challenged and competitive
retail environment in North America. We acknowledge that there are
opportunities to improve performance and we are addressing those
areas with a sense of urgency.”
“Most broadly, we remain steadfast in our strategic vision and
focused on maximizing the benefits of our global, multi-brand
platform, while continuing to drive strength in our core Coach
brand. Our conviction is reflected, in part, by the $1 billion
share repurchase program we established and began to implement in
the fourth fiscal quarter. Together with our annual dividend, this
underscores our confidence in driving long-term, sustainable growth
and commitment to returning capital to shareholders.”
Returning Capital to Shareholders:
During the fourth fiscal quarter, the Company commenced its
share buyback program, repurchasing approximately 3.4 million
shares of its common stock at an average cost of $29.31 for a total
of approximately $100 million. Therefore, for the fiscal year, the
Company returned approximately $490 million to shareholders through
dividends and share repurchases. At the end of the period, $900
million remained under the Company's current repurchase
authorization. The Company plans to return approximately $700
million to shareholders in Fiscal 2020 through dividends and share
repurchases.
The Company also announced that its Board of Directors declared
a quarterly cash dividend of $0.3375 per common share, maintaining
an annual rate of $1.35. The dividend is payable on September 30,
2019 to shareholders of record as of the close of business on
September 6, 2019.
Non-GAAP Reconciliation:
During the fiscal fourth quarter, the Company recorded certain
charges associated with its Integration and Acquisition activities
and ERP implementation efforts. Taken together, these items
decreased the Company’s fourth quarter reported net income by
approximately $27 million or about $0.10 per diluted share. On a
full year basis, these items, together with the impact associated
with Tax Legislation changes, reduced the Company’s reported net
income by $105 million or about $0.36 per diluted share. Please
refer to the financial tables included herein for a detailed
reconciliation of the Company’s reported to non-GAAP results.
Overview of Fourth Quarter 2019
Tapestry, Inc. Results:
- Net sales totaled $1.51 billion for the fourth fiscal
quarter as compared to $1.48 billion in the prior year, an increase
of 2% on a reported basis and 4% in constant currency.
- Gross profit totaled $999 million on a reported basis,
while gross margin for the quarter was 66.0% compared to $1.00
billion and 67.5%, respectively, in the prior year. On a non-GAAP
basis, gross profit totaled $1.02 billion, while gross margin was
67.3% as compared to $1.01 billion and 67.9%, respectively, in the
prior year.
- SG&A expenses totaled $829 million on a reported
basis and represented 54.8% of sales compared to $815 million and
54.9%, respectively in the year-ago quarter. On a non-GAAP basis,
SG&A expenses were $797 million and represented 52.7% of sales
as compared to approximately $780 million and 52.6%, respectively,
in the year-ago period.
- Operating income totaled $170 million on a reported
basis, while operating margin was 11.2% versus $187 million and an
operating margin of 12.6% in the prior year. On a non-GAAP basis,
operating income was $221 million, while operating margin was 14.6%
versus $228 million and an operating margin of 15.3% in the prior
year.
- Net interest expense was $11 million in the quarter as
compared to $14 million in the year ago period.
- Net income for the quarter was $149 million on a
reported basis, with earnings per diluted share of $0.51. This
compared to net income of $212 million with earnings per diluted
share of $0.73 in the prior year period. The reported tax rate for
the quarter of 6.4% compared to the prior year reported rate of
(22.5)%, which included favorable tax impacts associated with tax
legislation changes as well as a one-time reversal of valuation
allowances. On a non-GAAP basis, net income for the quarter totaled
$175 million, with earnings per diluted share of $0.61. This
compared to non-GAAP net income of $176 million with earnings per
diluted share of $0.60 in the prior year period. The non-GAAP tax
rate for the quarter was 16.4% compared to 17.4% in the prior
year.
- Inventory was $778 million at the end of quarter versus
ending inventory of $674 million in the year ago period.
Fourth fiscal quarter results in each of the Company’s
reportable segments were as follows:
Coach Fourth Quarter 2019
Results:
- Net sales for Coach totaled $1.10 billion for the fourth
fiscal quarter even with the prior year on a reported basis, or an
increase of 2% on a constant currency basis. Global comparable
store sales increased 2%, including a benefit of approximately 150
basis points driven by an increase in global e-commerce.
- Gross profit for Coach totaled $765 million, while gross
margin was 69.7% on a reported and non-GAAP basis. This compared to
reported gross profit and margin in the prior year of $762 million
and 69.3%, respectively. On a non-GAAP basis, gross profit was $765
million, while gross margin was 69.6% in the prior year’s fourth
quarter.
- SG&A expenses for Coach were $465 million on a
reported basis and represented 42.4% of sales. On a non-GAAP basis,
SG&A expenses were $464 million and represented 42.3% of sales.
This compared to expenses of $471 million or 42.9% of sales in the
year-ago quarter on both a reported and non-GAAP basis.
- Operating income for Coach totaled $300 million compared
to reported operating income of $291 million in the prior year,
while operating margin was 27.3% versus 26.4% a year ago. On a
non-GAAP basis, operating income was $301 million compared to $294
million in the prior year, while operating margin was 27.5% versus
26.8% a year ago.
Kate Spade Fourth Quarter 2019
Results:
- Net sales for Kate Spade totaled $332 million for the
fourth fiscal quarter as compared to $312 million in the prior
year, an increase of 6% on a reported basis and 7% in constant
currency. Global comparable store sales declined 6%, including the
positive impact of approximately 600 basis points from global
e-commerce.
- Gross profit for Kate Spade totaled $206 million on a
reported basis, while gross margin for the quarter was 62.0% as
compared to $203 million and 65.1%, respectively, in the prior
year. On a non-GAAP basis, fourth quarter gross profit was $206
million, while gross margin was 62.2% as compared to $203 million
and 65.2%, respectively, in the year ago period.
- SG&A expenses for Kate Spade were $180 million on a
reported basis and represented 54.2% of sales. This compared to
reported SG&A expenses of $170 million in the year ago period,
which represented 54.5% of sales. On a non-GAAP basis, SG&A
expenses were $175 million and represented 52.9% of sales. This
compared to expenses of $163 million or 52.3% of sales on a
non-GAAP basis in the previous year.
- Operating income for Kate Spade was $26 million on a
reported basis, representing an operating margin of 7.8%. This
compared to operating income of $33 million and an operating margin
of 10.6% on a reported basis in the year ago period. On a non-GAAP
basis, operating income totaled $31 million, while operating margin
was 9.3%. This compared to operating income of $40 million and an
operating margin of 12.9% on a non-GAAP basis in the previous
year.
Stuart Weitzman Fourth Quarter 2019
Results:
- Net sales for Stuart Weitzman totaled $85 million for
the fourth fiscal quarter compared to $73 million reported in the
same period of the prior year, an increase of 17% on a reported
basis and 20% in constant currency.
- Gross profit for Stuart Weitzman totaled $29 million on
a reported basis, while gross margin for the quarter was 33.7% as
compared to $37 million and 50.3%, respectively, in the prior year.
On a non-GAAP basis, fourth quarter gross profit was $47 million,
while gross margin was 54.8% as compared to $39 million and 53.5%,
respectively, in the year ago period.
- SG&A expenses for Stuart Weitzman were $59 million
on a reported basis and represented 69.4% of sales as compared to
$57 million or 77.8% of sales in the prior year’s fourth quarter.
On a non-GAAP basis, SG&A expenses were approximately $56
million or 66.2 % of sales as compared to $55 million or 75.9% of
sales in the prior year.
- Operating income for Stuart Weitzman was a loss of $30
million on a reported basis, while operating margin was (35.7)%
versus a loss of $20 million and (27.5)%, respectively, in the
prior year. On a non-GAAP basis, the operating loss was $10 million
or (11.4)% of sales versus a loss of $16 million or (22.5)% of
sales, respectively, in the prior year.
Overview of Full Year 2019 Tapestry,
Inc. Results:
- Net sales totaled $6.03 billion for the full year 2019
as compared to $5.88 billion in the prior year, an increase of 3%
on a reported basis and 4% in constant currency.
- Gross profit totaled $4.05 billion on a reported basis,
while gross margin was 67.3% compared to $3.85 billion and 65.5%,
respectively, in the prior year. On a non-GAAP basis, gross profit
totaled $4.08 billion, while gross margin was 67.7% as compared to
$3.96 billion and 67.4%, respectively, in the prior year.
- SG&A expenses totaled $3.24 billion on a reported
basis and represented 53.8% of sales compared to $3.18 billion and
54.0%, respectively in the year-ago quarter. On a non-GAAP basis,
SG&A expenses were $3.14 billion and represented 52.0% of sales
as compared to approximately $2.97 billion and 50.6%, respectively,
in the year-ago period.
- Operating income totaled $814 million on a reported
basis, while operating margin was 13.5% versus $671 million and an
operating margin of 11.4% in the prior year. On a non-GAAP basis,
operating income was $945 million, while operating margin was 15.7%
versus $992 million and an operating margin of 16.9% in the prior
year.
- Net interest expense was $48 million as compared to $74
million a year ago.
- Net income totaled $643 million on a reported basis,
with earnings per diluted share of $2.21. This compared to net
income of $398 million with earnings per diluted share of $1.38 in
the prior year period. The reported tax rate for the year of 16.0%
compared to the prior year reported rate of 33.4%. On a non-GAAP
basis, net income totaled $749 million, with earnings per diluted
share of $2.57. This compared to non-GAAP net income of $760
million with earnings per diluted share of $2.63 in the prior year.
The non-GAAP tax rate for the year was 16.6% compared to 17.2% in
the prior year.
Full Year 2019 results in each of the Company’s reportable
segments were as follows:
Coach Full Year 2019
Results:
- Net sales for Coach totaled $4.27 billion as compared to
$4.22 billion in the prior year on a reported basis, or an increase
of 2% on a constant currency basis. Global comparable store sales
increased 2%, including a benefit of approximately 100 basis points
driven by an increase in global e-commerce.
- Gross profit for Coach totaled $3.00 billion, while
gross margin was 70.2% on a reported and non-GAAP basis. This
compared to reported gross profit and margin in the prior year of
$2.93 billion and 69.4%, respectively. On a non-GAAP basis, gross
profit was $2.94 billion, while gross margin was 69.5% in the prior
year.
- SG&A expenses for Coach were $1.85 billion on a
reported basis and represented 43.3% of sales. On a non-GAAP basis,
SG&A expenses were $1.84 billion and represented 43.1% of
sales. This compared to expenses of $1.81 billion or 43.0% of sales
a year-ago on both a reported and non-GAAP basis.
- Operating income for Coach totaled $1.15 billion
compared to reported operating income of $1.12 billion in the prior
year, while operating margin was 26.9% versus 26.5% a year ago. On
a non-GAAP basis, operating income was $1.16 billion compared to
$1.12 billion in the prior year, while operating margin was 27.1%
versus 26.6% a year ago.
Kate Spade Full Year 2019
Results:
- Net sales for Kate Spade totaled $1.37 billion as
compared to $1.28 billion in the prior year, an increase of 6% on a
reported basis and 7% in constant currency. Global comparable store
sales declined 7%, including the positive impact of approximately
400 basis points from global e-commerce.
- Gross profit for Kate Spade totaled $864 million on a
reported basis, while gross margin was 63.2% as compared to $706
million and 54.9%, respectively, in the prior year. On a non-GAAP
basis, gross profit was $870 million, while gross margin was 63.6%
as compared to $812 million and 63.2%, respectively, in the year
ago period.
- SG&A expenses for Kate Spade were $698 million on a
reported basis and represented 51.1% of sales. This compared to
reported SG&A expenses of $729 million in the year ago period,
which represented 56.7% of sales. On a non-GAAP basis, SG&A
expenses were $683 million and represented 50.0% of sales. This
compared to expenses of $615 million or 47.9% of sales on a
non-GAAP basis in the previous year.
- Operating income for Kate Spade was $166 million on a
reported basis, representing an operating margin of 12.1%. This
compared to operating loss of $23 million and an operating margin
of (1.8)% on a reported basis a year ago. On a non-GAAP basis,
operating income totaled $187 million, while operating margin was
13.6%. This compared to operating income of $197 million and an
operating margin of 15.4% on a non-GAAP basis in the previous
year.
Stuart Weitzman Full Year 2019
Results:
- Net sales for Stuart Weitzman totaled $389 million
compared to $374 million reported in the same period of the prior
year, an increase of 4% on a reported basis and 6% in constant
currency.
- Gross profit for Stuart Weitzman totaled $194 million on
a reported basis, while gross margin was 49.8% as compared to $211
million and 56.5%, respectively, in the prior year. On a non-GAAP
basis, gross profit was $213 million, while gross margin was 54.8%
as compared to $217 million and 58.1%, respectively, a year
ago.
- SG&A expenses for Stuart Weitzman were $245 million
on a reported basis and represented 62.9% of sales as compared to
$212 million or 56.7% of sales the prior year. On a non-GAAP basis,
SG&A expenses were approximately $230 million or 59.0% of sales
as compared to $204 million or 54.6% of sales in the prior
year.
- Operating income for Stuart Weitzman was a loss of $51
million on a reported basis, while operating margin was (13.1)%.
This compared to a slight operating loss or margin of (0.1)% on a
reported basis in the prior year. On a non-GAAP basis, the
operating loss was $17 million or (4.3)% of sales versus operating
income of $13 million or 3.5% of sales, respectively, in the prior
year.
Mr. Luis added, “Looking ahead, we are revising our outlook for
Fiscal 2020 to reflect the current trends in our business, notably
at Kate Spade. We believe this is prudent, particularly in light of
the uncertain environment in North America, and as we build the
brand’s global awareness. That said, we understand it’s critical to
act swiftly and decisively, applying our learnings, to drive
positive change. As part of this strategy, we are deliberately
pulling back on the number of new store openings for the brand
while we seek to focus on maximizing productivity.”
“Importantly, with continued momentum at the Coach brand, our
top priority is to fuel an acceleration in our acquired businesses
to unlock the power of our multi-brand platform. Therefore, while
our long-term vision is unchanged, we are modifying our capital
allocation policy in Fiscal 2020, dedicating our resources to
driving organic growth, and do not expect to pursue strategic
acquisitions. In addition, we plan to increase the capital we
return to shareholders, repurchasing approximately $300 million of
common stock while maintaining our annual dividend, resulting in a
total payout of nearly $700 million. Overall, we remain confident
in the potential of our brands and the operating model we’ve
built.”
Fiscal Year and First Quarter 2020
Outlook
The following outlook is provided on a non-GAAP basis and
replaces all previous guidance.
The Company expects revenues for Fiscal 2020 to increase at a
low-single-digit rate from Fiscal 2019. In addition, the Company
projects earnings per diluted share to be approximately even with
prior year. The primary change from the prior outlook is the
expectation for more modest topline growth at Kate Spade in North
America, impacting the Company’s ability to leverage its strategic
investments and fixed costs. Importantly, the Company continues to
expect top and bottom line growth at Coach and profitability
improvements at Stuart Weitzman in Fiscal 2020. Net interest
expense for the year is expected to be $45 to $50 million and the
full year Fiscal 2020 tax rate is projected to be in the area of
17.5%.
For the first fiscal quarter, the Company projects revenues to
be slightly below prior year and earnings per diluted share to
decline on a year-over-year basis. The outlook for the first fiscal
quarter includes the continued impact of the Company’s foundational
strategic initiatives, including investments in new stores
openings, distributor buybacks as well as systems.
Fiscal Year 2020 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, costs associated
with the Company’s ERP implementation, and the impact of select
store closures that have not yet occurred as the Company continues
to refine its plan and the related estimate and timing of costs
that will be incurred. 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 2020 guidance.
This Fiscal 2020 non-GAAP guidance excludes (1) expected pre-tax
charges of approximately $30 to $40 million attributable to the
Company’s ERP implementation efforts; (2) estimated pre-tax
Integration and Acquisition charges of approximately $20 to $30
million; (3) projected charges related to select store closures as
the Company seeks to optimize its fleet; and (4) the impact from
the new lease accounting standard, ASU 2016-02 “Leases (Topic
842),” which the Company will adopt in the first fiscal quarter of
2020.
Conference Call Details:
The Company will host a conference call to review these results
at 8:30 a.m. (ET) today, August 15, 2019. 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
3592098. 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 3592098. 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 2020 first quarter results
on Tuesday November 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 2020 Outlook,” and
statements regarding the Company’s planned share repurchase program
and anticipated dividend payments for future quarters, 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,” “roadmap,” "anticipate," “excited,”
“moving,” “leveraging,” “capitalizing,” “developing,” “drive,”
“targeting,” “assume,” “plan,” “build,” “pursue,” “maintain,” “on
track,” “well positioned to,” “look forward to,” “looking ahead,”
“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 ERP
implementation and growth strategies, our ability to achieve
intended benefits, cost savings and synergies from acquisitions,
the risk of cybersecurity threats and privacy or data security
breaches, and 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 and
Years Ended June 29, 2019 and June 30, 2018
(in millions, except per share
data) (unaudited) (unaudited)
(audited) QUARTER ENDED YEAR ENDED June
29,2019 June 30,2018 June 29,2019 June
30,2018 Net sales
$
1,513.7
$
1,483.7
$
6,027.1
$
5,880.0
Cost of sales
514.5
481.9
1,973.4
2,031.5
Gross Profit
999.2
1,001.8
4,053.7
3,848.5
Selling, general and administrative expenses
829.3
814.6
3,239.6
3,177.7
Operating income
169.9
187.2
814.1
670.8
Interest expense, net
11.0
14.4
47.9
74.0
Income before provision for income taxes
158.9
172.8
766.2
596.8
Provision for income taxes
10.0
(38.9
)
122.8
199.3
Net income
$
148.9
$
211.7
$
643.4
$
397.5
Net income per share: Basic
$
0.51
$
0.74
$
2.22
$
1.39
Diluted
$
0.51
$
0.73
$
2.21
$
1.38
Shares used in computing net income per share: Basic
289.1
287.9
289.4
285.4
Diluted
289.8
291.3
290.8
288.6
TAPESTRY, INC.
GAAP TO NON-GAAP RECONCILIATION
For the Quarters Ended June 29, 2019 and
June 30, 2018 (in millions,
except per share data) (unaudited) June 29, 2019
GAAP Basis(As Reported) ERPImplementation(1)
Integration &Acquisition(2) Impact of
TaxLegislation Non-GAAP Basis(ExcludingItems)
Gross profit
$ 999.2
$ —
$ (18.7)
$ —
$ 1,017.9
Selling, general and administrative expenses
829.3
11.8
20.4
—
797.1
Operating income
169.9
(11.8)
(39.1)
—
220.8
Income before provision for income taxes
158.9
(11.8)
(39.1)
—
209.8
Provision for income taxes
10.0
(3.1)
(21.3)
—
34.4
Net income
148.9
(8.7)
(17.8)
—
175.4
Diluted net income per share
0.51
(0.03)
(0.07)
—
0.61
June 30, 2018 GAAP Basis(As Reported)
OperationalEfficiency Plan(3) Integration
&Acquisition(2) Impact of TaxLegislation(4)
Non-GAAP Basis(Excluding Items) Gross profit
$ 1,001.8
$ —
$ (5.5)
$ —
$ 1,007.3
Selling, general and administrative expenses
814.6
10.0
24.8
—
779.8
Operating income
187.2
(10.0)
(30.3)
—
227.5
Income before provision for income taxes
172.8
(10.0)
(30.3)
—
213.1
Provision for income taxes
(38.9)
(3.1)
(51.4)
(21.4)
37.0
Net income
211.7
(6.9)
21.1
21.4
176.1
Diluted net income per share
0.73
(0.03)
0.09
0.07
0.60
(1) Amounts as of June 29, 2019 represent technology
implementation costs. (2) Amounts as of June 29, 2019
represent charges attributable to acquisition and integration costs
related to: - One-time write off of inventory- Professional
fees- Organization-related costs Amounts as of June 30, 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. Provision for income taxes has been favorably impacted as
a result of the reversal of certain valuation allowances that were
established during purchase accounting. These charges include:
- Professional fees- Limited life purchase accounting
adjustments- Organizational costs as a result of integration
(3) Amounts as of June 30, 2018 represent technology infrastructure
costs. (4) Amounts as of June 30, 2018 represent
charges due to the net impact of the transition tax and
re-measurement of deferred tax balances.
TAPESTRY, INC. GAAP TO NON-GAAP RECONCILIATION
For the Years Ended June 29, 2019 and June
30, 2018 (in millions, except
per share data) (unaudited) June 29, 2019
GAAP Basis(As Reported) ERPImplementation(1)
Integration &Acquisition(2) Impact of
TaxLegislation(3) Non-GAAP Basis(ExcludingItems)
Gross profit
$ 4,053.7
$ —
$ (27.8)
$ —
$ 4,081.5
Selling, general and administrative expenses
3,239.6
36.9
66.6
—
3,136.1
Operating income
814.1
(36.9)
(94.4)
—
945.4
Income before provision for income taxes
766.2
(36.9)
(94.4)
—
897.5
Provision for income taxes
122.8
(9.4)
(25.8)
9.2
148.8
Net income
643.4
(27.5)
(68.6)
(9.2)
748.7
Diluted net income per share
2.21
(0.09)
(0.24)
(0.03)
2.57
June 30, 2018 GAAP Basis(As Reported)
OperationalEfficiency Plan(4) Integration
&Acquisition(2) Impact of TaxLegislation(3)
Non-GAAP Basis(ExcludingItems) Gross profit
$ 3,848.5
$ —
$ (116.4)
$ —
$ 3,964.9
Selling, general and administrative expenses
3,177.7
19.5
185.2
—
2,973.0
Operating income
670.8
(19.5)
(301.6)
—
991.9
Income before provision for income taxes
596.8
(19.5)
(301.6)
—
917.9
Provision for income taxes
199.3
(6.2)
(130.7)
178.2
158.0
Net income
397.5
(13.3)
(170.9)
(178.2)
759.9
Diluted net income per share
1.38
(0.05)
(0.58)
(0.62)
2.63
(1) Amounts as of June 29, 2019 primarily represent
technology implementation costs. (2) Amounts as of June 29,
2019 represent charges attributable to acquisition and integration
costs related to: - Organization-related costs- Professional
fees- One-time write off of inventory- Limited life purchase
accounting adjustments Amounts as of June 30, 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. Provision for income taxes has been favorably impacted as
a result of the reversal of certain valuation allowances that were
established during purchase accounting. 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 (3) Amounts as of June 29, 2019
represent charges primarily due to the transition tax related to
foreign earnings deemed to be repatriated. Amounts as of June 30,
2018 represent charges due to the net impact of the transition tax
and re-measurement of deferred tax balances. (4) Amounts as
of June 30, 2018 primarily represent technology infrastructure
costs.
TAPESTRY,
INC. GAAP TO NON-GAAP
RECONCILIATION - FOR SEGMENT RESULTS For the Quarters Ended June 29, 2019 and June 30,
2018 (in millions)
(unaudited) June 29,
2019 GAAP Coach Kate Spade
StuartWeitzman Corporate Non-GAAP Cost of
sales Integration & Acquisition
0.1
(0.9)
(17.9)
—
Gross profit
$ 999.2
$ 0.1
$ (0.9)
$ (17.9)
$ —
$ 1,017.9
SG&A expenses Integration & Acquisition
1.6
4.4
2.8
11.6
ERP Implementation — — —
11.8
SG&A expenses
$ 829.3
$ 1.6
$ 4.4
$ 2.8
$ 23.4
$ 797.1
Operating income
$ 169.9
$ (1.5)
$ (5.3)
$ (20.7)
$ (23.4)
$ 220.8
June 30, 2018 GAAP Coach Kate
Spade StuartWeitzman Corporate Non-GAAP
Cost of sales Integration & Acquisition
(3.1)
(0.1)
(2.3)
—
Gross profit
$ 1,001.8
$ (3.1)
$ (0.1)
$ (2.3)
$ —
$ 1,007.3
SG&A expenses Integration & Acquisition
0.3
7.1
1.3
16.1
Operational Efficiency Plan — — —
10.0
SG&A expenses
$ 814.6
$ 0.3
$ 7.1
$ 1.3
$ 26.1
$ 779.8
Operating income
$ 187.2
$ (3.4)
$ (7.2)
$ (3.6)
$ (26.1)
$ 227.5
TAPESTRY, INC.
GAAP TO NON-GAAP RECONCILIATION - FOR
SEGMENT RESULTS For the Years
Ended June 29, 2019 and June 30, 2018 (in millions) (unaudited) June 29, 2019
GAAP Coach Kate Spade StuartWeitzman
Corporate Non-GAAP Cost of sales Integration
& Acquisition
(1.9)
(6.3)
(19.6)
—
Gross profit
$ 4,053.7
$ (1.9)
$ (6.3)
$ (19.6)
$ —
$ 4,081.5
SG&A expenses Integration & Acquisition
7.1
14.5
15.0
30.0
ERP Implementation — — —
36.9
SG&A expenses
$ 3,239.6
$ 7.1
$ 14.5
$ 15.0
$ 66.9
$ 3,136.1
Operating income
$ 814.1
$ (9.0)
$ (20.8)
$ (34.6)
$ (66.9)
$ 945.4
June 30, 2018 GAAP Coach Kate
Spade StuartWeitzman Corporate Non-GAAP
Cost of sales Integration & Acquisition
(4.1)
(106.5)
(5.8)
—
Gross profit
$ 3,848.5
$ (4.1)
$ (106.5)
$ (5.8)
$ —
$ 3,964.9
SG&A expenses Integration & Acquisition
0.5
113.7
7.8
63.2
Operational Efficiency Plan — — —
19.5
SG&A expenses
$ 3,177.7
$ 0.5
$ 113.7
$ 7.8
$ 82.7
$ 2,973.0
Operating income
$ 670.8
$ (4.6)
$ (220.2)
$ (13.6)
$ (82.7)
$ 991.9
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 and the impact of tax
legislation for Tapestry, Inc.
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
and gross margin for the Stuart Weitzman 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 27, 2020 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 Years Ended June 29,
2019 and June 30, 2018 (in
millions) (unaudited) Coach Kate
Spade StuartWeitzman Corporate Total
Three Months Ended June 29,
2019 Net sales
$ 1,096.6
$ 331.9
$ 85.2
$ —
$ 1,513.7
Gross profit
764.9
205.6
28.7
—
999.2
Operating income (loss)
299.5
25.6
(30.4)
(124.8)
169.9
Income (loss) before provision for income taxes
299.5
25.6
(30.4)
(135.8)
158.9
Three Months Ended June 30,
2018 Net sales
$ 1,098.9
$ 311.9
$ 72.9
$ —
$ 1,483.7
Gross profit
762.1
203.1
36.6
—
1,001.8
Operating income (loss)
290.5
33.1
(20.0)
(116.4)
187.2
Income (loss) before provision for income taxes
290.5
33.1
(20.0)
(130.8)
172.8
Year Ended June 29, 2019
Net sales
$ 4,270.9
$ 1,366.8
$ 389.4
$ —
$ 6,027.1
Gross profit
2,996.4
863.6
193.7
—
4,053.7
Operating income (loss)
1,148.4
165.7
(51.2)
(448.8)
814.1
Income (loss) before provision for income taxes
1,148.4
165.7
(51.2)
(496.7)
766.2
Year Ended June 30, 2018
Net sales
$ 4,221.5
$ 1,284.7
$ 373.8
$ —
$ 5,880.0
Gross profit
2,931.5
705.7
211.3
—
3,848.5
Operating income (loss)
1,117.2
(22.7)
(0.3)
(423.4)
670.8
Income (loss) before provision for income taxes
1,117.2
(22.7)
(0.3)
(497.4)
596.8
TAPESTRY, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS At June 29, 2019 and
June 30, 2018 (in
millions) (unaudited) (audited)
June 29,2019 June 30,2018 ASSETS Cash,
cash equivalents and short-term investments
$
1,233.8
$
1,250.0
Receivables
298.1
314.1
Inventories
778.3
673.8
Other current assets
246.6
194.7
Total current assets
2,556.8
2,432.6
Property and equipment, net
938.8
885.4
Other noncurrent assets
3,381.7
3,360.3
Total assets
$
6,877.3
$
6,678.3
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts
payable
$
243.6
$
264.3
Accrued liabilities
673.6
673.2
Current debt
0.8
0.7
Total current liabilities
918.0
938.2
Long-term debt
1,601.9
1,599.9
Other liabilities
844.0
895.6
Stockholders' equity
3,513.4
3,244.6
Total liabilities and stockholders' equity
$
6,877.3
$
6,678.3
TAPESTRY, INC.
STORE COUNT At March 30, 2019 and June 29, 2019
(unaudited) As of
Acquired As of Directly-Operated Store Count: March 30, 2019 Stores Openings (Closures) June 29,
2019 Coach
North America
392
—
1
(2)
391
International
589
—
16
(10)
595
Kate Spade
North America
212
—
2
(1)
213
International
181
—
15
(2)
194
Stuart Weitzman
North America
70
—
1
—
71
International
58
12
6
—
76
TAPESTRY, INC. STORE COUNT At June
30, 2018 and June 29, 2019 (unaudited) As of
Acquired As of Directly-Operated Store Count: June 30, 2018 Stores Openings (Closures) June 29,
2019 Coach
North America
402
—
4
(15)
391
International
585
—
44
(34)
595
Kate Spade
North America
200
—
24
(11)
213
International
142
21
44
(13)
194
Stuart Weitzman
North America
68
—
5
(2)
71
International
35
18
23
—
76
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190815005158/en/
Tapestry, Inc. Analysts & Media: Andrea Shaw Resnick Global
Head of Investor Relations and Corporate Communications
212/629-2618 aresnick@tapestry.com Christina Colone Vice President,
Investor Relations 212/946-7252 ccolone@tapestry.com
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