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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Tapestry Inc | NYSE:TPR | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.25 | 0.55% | 46.00 | 46.665 | 45.89 | 46.27 | 2,174,414 | 01:00:00 |
Significant Actions Underway to Mitigate the Impact of Covid-19
Tapestry, Inc. (NYSE: TPR), a leading New York-based house of modern luxury accessories and lifestyle brands, today reported results for the fiscal third quarter ended March 28, 2020.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200430005276/en/
(Photo: Business Wire)
Jide Zeitlin, Chairman and Chief Executive Officer of Tapestry, Inc., said, “We entered the calendar year with strong underlying momentum. As the novel coronavirus expanded across the globe, our results materially weakened. In navigating this unprecedented crisis, we are guided by our values and have continued to prioritize our community – our people, their families, and our customers. I am incredibly proud of our teams around the world and the resilience they have shown in facing events that have impacted every aspect of how we live our lives and manage our business.”
“No one is immune to the effects of this one hundred year storm. We are taking aggressive actions to assure that Tapestry emerges a strong company when conditions normalize. We have powerful brands with deep consumer connections and a long history of successfully navigating global challenges and macroeconomic shocks. In addition, we have a strong balance sheet, we benefit from a multi-channel international distribution model with only modest exposure to wholesale, and a diversified supply chain.”
“We are building on our strengths and moving swiftly to adapt to the current environment with a focus on preserving liquidity and enhancing financial flexibility. We are accelerating key elements of the transformational work we began prior to the crisis, notably driving outsized growth in digital and creating a more streamlined and data-driven organization.”
Distribution Network
During the quarter, 90% of Tapestry’s stores were either closed or operating on shortened hours. We have seen a degree of normalcy return in certain areas first impacted, including Mainland China and Korea, and expect to apply lessons learned as, over time, additional countries and regions reopen. Across all brands, our network was impacted as follows:
Supply Chain
Tapestry’s supply chain continued to operate effectively over the third quarter given its globally diversified manufacturing and sourcing base, with relatively limited exposure to China. Subsequent to quarter-end, the Company has been successfully working with its service providers to balance changing levels of supply and demand.
Mitigating Actions
As previously announced, the Company moved quickly to mitigate the impact of Covid-19, reinforcing its liquidity and financial flexibility. Tapestry has also accelerated its transformational work to position the Company for recovery and long-term, profitable growth:
In addition, the Company is taking additional actions to further streamline its organization, including reductions in its corporate and retail workforce. In aggregate, the Company expects to incur pre-tax charges associated with these actions of approximately $55-$70 million, primarily related to cash severance costs, which will be reflected beginning in the fourth quarter of fiscal 2020, and are expected to be completed by the end of fiscal 2021. These charges will be recorded within SG&A expenses. These actions position Tapestry to emerge as a global, consumer-centric company, with a more agile organizational structure. Being more responsive to the rapidly changing retail environment enables Tapestry’s multi-year growth agenda.
Outlook
“The impact of the Covid-19 pandemic transcends near-term results. Consumer behaviors are changing and secular trends are accelerating. In this environment, we are planning conservatively while acting decisively to transform the way we operate and engage with our customers. The saliency of our brands plus the strong financial position of our company will enable us to successfully manage through this crisis, as we become a more consumer-centric, data-driven, and agile organization," Mr. Zeitlin concluded.
Overview of Third Quarter 2020 Tapestry, Inc. Results
The following results include the impact of the coronavirus. Please note the Company is not providing comparable store sales figures, as the Company believes this will not be a valuable measure given the current business environment and number of store closures during the quarter.
Fiscal third quarter results by brand were as follows:
Coach Third Quarter 2020 Results
Kate Spade Third Quarter 2020 Results
Stuart Weitzman Third Quarter 2020 Results
Non-GAAP Reconciliation
In the third quarter of fiscal 2020, the Company recorded certain items that increased its pre-tax loss by $654 million and its net loss by $601 million or about $2.18 per diluted share. Please refer to the financial tables included herein for a detailed reconciliation of the Company’s reported to non-GAAP results. These items included:
Impairments:
In the third quarter of fiscal 2020, the Company recorded $267 million of impairment charges to indefinite-lived brand intangible assets and $211 million of impairment charges to goodwill for the Stuart Weitzman reporting unit. These charges were as a result of a decline in both current and future expected cash flows, exacerbated by the Covid-19 pandemic, which resulted in a decline in sales driven by closures of a significant portion of stores and traffic declines globally. In addition, the Company recorded $104 million related to an increase in inventory reserves, and $66 million of impairment charges in store assets, including the lease assets recorded in connection with the adoption of the new lease accounting standard. These charges were primarily a result of decreased net sales and cash flow projections associated with Covid-19.
ERP Implementation and Organization-related & Integration Costs:
In addition, the Company recorded $6 million in pre-tax charges associated with its ERP and Organization-related and Integration activities.
Fiscal Year 2020 Outlook
Given the dynamic nature of the Covid-19 crisis and lack of visibility, the potential financial impact to our business cannot be accurately projected. Therefore, the Company is not providing guidance for its fiscal fourth quarter and full year 2020.
Conference Call Details
The Company will host a conference call to review these results at 8:30 a.m. (ET) today, April 30, 2020. 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 2376079. 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 2376079. 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.
Upcoming Events
The Company expects to report fiscal 2020 fourth quarter and full year results on Thursday August 13, 2020. To receive notification of future announcements, please register at www.tapestry.com/investors ("Subscribe to E-Mail Alerts").
The Company intends to host an analyst and investor day at its headquarters in New York City in the summer of 2020 to discuss strategic initiatives. More details, including webcast registration, will be provided in the future.
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 “Outlook” and “Fiscal Year 2020 Outlook,” statements regarding the potential impact of the Covid-19 pandemic and success of mitigating actions, the Company’s multi-year growth agenda and 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,” “progress,” “future,” “emerge,” “assure,” “on track,” “well positioned to,” “look forward to,” “looking ahead,” “to acquire,” “achieve,” “strategic vision,” “ongoing headwinds,” “growth opportunities,” “view,” 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 the impact of the Covid-19 pandemic, the ability to control costs and successfully execute our growth strategies, expected economic trends, the ability to anticipate consumer preferences, risks associated with operating in international markets, 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 the CARES Act and other legislation, etc. Please refer to the Company’s latest Annual Report on Form 10-K, quarterly report on 10-Q 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 Quarter and Nine Months Ended March 28, 2020 and March 30, 2019 (in millions, except per share data) (unaudited) (unaudited) QUARTER ENDED NINE MONTHS ENDED March 28, 2020 March 30, 2019 March 28, 2020 March 30, 2019 Net sales$ 1,072.7
$ 1,331.4
$ 4,246.6
$ 4,513.4
Cost of sales456.5
415.5
1,506.2
1,458.9
Gross profit616.2
915.9
2,740.4
3,054.5
Selling, general and administrative expenses1,301.7
806.1
3,011.2
2,405.9
Operating income (loss)(685.5)
109.8
(270.8)
648.6
Interest expense, net13.5
10.6
39.8
36.9
Other expense (gain)6.0
4.0
12.8
4.4
Income before provision for income taxes(705.0)
95.2
(323.4)
607.3
Provision for income taxes(27.9)
(22.2)
34.9
112.8
Net income (loss)$ (677.1)
$ 117.4
$ (358.3)
$ 494.5
Net income (loss) per share: Basic$ (2.45)
$ 0.40
$ (1.28)
$ 1.71
Diluted$ (2.45)
$ 0.40
$ (1.28)
$ 1.70
Shares used in computing net income (loss) per share: Basic276.1
290.0
279.4
289.5
Diluted276.6
290.9
280.2
291.2
TAPESTRY, INC. DETAIL TO NET SALES For the Quarter and Nine Months Ended March 28, 2020 and March 30, 2019 (in millions) (unaudited) QUARTER ENDED March 28, 2020 March 30, 2019 % Change Constant Currency %Change Coach$ 772.5
$ 965.0
(20)%
(20)%
Kate Spade249.5
281.1
(11)%
(11)%
Stuart Weitzman50.7
85.3
(40)%
(40)%
Total Tapestry$ 1,072.7
$ 1,331.4
(19)%
(19)%
NINE MONTHS ENDED March 28, 2020 March 30, 2019 % Change Constant Currency %Change Coach$ 3,008.3
$ 3,174.3
(5)%
(5)%
Kate Spade985.4
1,034.9
(5)%
(5)%
Stuart Weitzman252.9
304.2
(17)%
(16)%
Total Tapestry$ 4,246.6
$ 4,513.4
(6)%
(6)%
TAPESTRY, INC. GAAP TO NON-GAAP RECONCILIATION (in millions, except per share data) (unaudited) For the Quarter Ended March 28, 2020 Items Affecting Comparability GAAP Basis(As Reported) ERP Implementation Organization-related &Integration Costs Impairment Non-GAAP Basis(Excluding Items) Cost of sales Coach475.7
-
-
(61.9)
537.6
Kate Spade122.5
-
-
(32.3)
154.8
Stuart Weitzman18.0
-
-
(9.8)
27.8
Gross profit(1)$ 616.2
$ -
$ -
$ (104.0)
$ 720.2
SG&A expenses Coach437.6
-
-
16.4
421.2
Kate Spade213.8
-
0.3
41.5
172.0
Stuart Weitzman548.7
-
0.2
485.8
62.7
Corporate101.6
2.8
2.9
-
95.9
SG&A expenses$ 1,301.7
$ 2.8
$ 3.4
$ 543.7
$ 751.8
Operating income (loss) Coach38.1
-
-
(78.3)
116.4
Kate Spade(91.3)
-
(0.3)
(73.8)
(17.2)
Stuart Weitzman(530.7)
-
(0.2)
(495.6)
(34.9)
Corporate(101.6)
(2.8)
(2.9)
-
(95.9)
Operating income (loss)$ (685.5)
$ (2.8)
$ (3.4)
$ (647.7)
$ (31.6)
Provision for income taxes(27.9)
(0.7)
(2.5)
(49.4)
24.7
Net income (loss)$ (677.1)
$ (2.1)
$ (0.9)
$ (598.3)
$ (75.8)
Net income (loss) per diluted common share$ (2.45)
$ (0.01)
$ -
$ (2.17)
$ (0.27)
(1) Adjustments within Gross profit are recorded within Cost of sales. TAPESTRY, INC. GAAP TO NON-GAAP RECONCILIATION (in millions, except per share data) (unaudited) For the Nine Months Ended March 28, 2020 Items Affecting Comparability GAAP Basis(As Reported) ERP Implementation Organization-related &Integration Costs Impairment Non-GAAP Basis(Excluding Items) Cost of sales Coach2,030.6
-
(0.1)
(61.9)
2,092.6
Kate Spade576.4
-
(1.2)
(32.3)
609.9
Stuart Weitzman133.4
-
(4.3)
(9.8)
147.5
Gross profit(1)$ 2,740.4
$ -
$ (5.6)
$ (104.0)
$ 2,850.0
SG&A expenses Coach1,410.2
-
(0.1)
57.9
1,352.4
Kate Spade607.0
-
1.1
66.7
539.2
Stuart Weitzman673.8
-
(1.9)
494.7
181.0
Corporate320.2
23.6
27.4
-
269.2
SG&A expenses$ 3,011.2
$ 23.6
$ 26.5
$ 619.3
$ 2,341.8
Operating income (loss) Coach620.4
-
-
(119.8)
740.2
Kate Spade(30.6)
-
(2.3)
(99.0)
70.7
Stuart Weitzman(540.4)
-
(2.4)
(504.5)
(33.5)
Corporate(320.2)
(23.6)
(27.4)
-
(269.2)
Operating income (loss)$ (270.8)
$ (23.6)
$ (32.1)
$ (723.3)
$ 508.2
Provision for income taxes34.9
(5.7)
(11.9)
(61.5)
114.0
Net income (loss)$ (358.3)
$ (17.9)
$ (20.2)
$ (661.8)
$ 341.6
Net income (loss) per diluted common share$ (1.28)
$ (0.06)
$ (0.07)
$ (2.37)
$ 1.22
(1) Adjustments within Gross profit are recorded within Cost of sales. TAPESTRY, INC. GAAP TO NON-GAAP RECONCILIATION (in millions, except per share data) (unaudited) For the Quarter Ended March 30, 2019 Items Affecting Comparability GAAP Basis(As Reported) ERP Implementation Integration &Acquisition Impact of TaxLegislation Non-GAAP Basis(Excluding Items) Cost of sales Coach691.7
-
-
-
691.7
Kate Spade177.9
-
(4.3)
-
182.2
Stuart Weitzman46.3
-
(0.7)
-
47.0
Gross profit(1)$ 915.9
$ -
$ (5.0)
$ -
$ 920.9
SG&A expenses Coach452.8
-
5.5
-
447.3
Kate Spade170.8
-
3.0
-
167.8
Stuart Weitzman60.4
-
0.1
-
60.3
Corporate122.1
14.7
7.0
-
100.4
SG&A expenses$ 806.1
$ 14.7
$ 15.6
$ -
$ 775.8
Operating income (loss) Coach238.9
-
(5.5)
-
244.4
Kate Spade7.1
-
(7.3)
-
14.4
Stuart Weitzman(14.1)
-
(0.8)
-
(13.3)
Corporate(122.1)
(14.7)
(7.0)
-
(100.4)
Operating income (loss)$ 109.8
$ (14.7)
$ (20.6)
$ -
$ 145.1
Provision for income taxes(22.2)
(3.7)
(2.4)
(24.9)
8.8
Net income (loss)$ 117.4
$ (11.0)
$ (18.2)
$ 24.9
$ 121.7
Net income (loss) per diluted common share$ 0.40
$ (0.05)
$ (0.06)
$ 0.09
$ 0.42
(1) Adjustments within Gross profit are recorded within Cost of sales. TAPESTRY, INC. GAAP TO NON-GAAP RECONCILIATION (in millions, except per share data) (unaudited) For the Nine Months Ended March 30, 2019 Items Affecting Comparability GAAP Basis(As Reported) ERP Implementation Integration &Acquisition Impact of TaxLegislation Non-GAAP Basis(Excluding Items) Cost of sales Coach2,231.5
-
(2.0)
-
2,233.5
Kate Spade658.0
-
(5.4)
-
663.4
Stuart Weitzman165.0
-
(1.7)
-
166.7
Gross profit(1)$ 3,054.5
$ -
$ (9.1)
$ -
$ 3,063.6
SG&A expenses Coach1,383.1
-
5.5
-
1,377.6
Kate Spade517.9
-
10.1
-
507.8
Stuart Weitzman186.9
-
12.2
-
174.7
Corporate318.0
25.1
18.4
-
274.5
SG&A expenses$ 2,405.9
$ 25.1
$ 46.2
$ -
$ 2,334.6
Operating income (loss) Coach848.4
-
(7.5)
-
855.9
Kate Spade140.1
-
(15.5)
-
155.6
Stuart Weitzman(21.9)
-
(13.9)
-
(8.0)
Corporate(318.0)
(25.1)
(18.4)
-
(274.5)
Operating income (loss)$ 648.6
$ (25.1)
$ (55.3)
$ -
$ 729.0
Provision for income taxes112.8
(6.3)
(4.5)
9.2
114.4
Net income (loss)$ 494.5
$ (18.8)
$ (50.8)
$ (9.2)
$ 573.3
Net income (loss) per diluted common share$ 1.70
$ (0.06)
$ (0.17)
$ (0.04)
$ 1.97
(1) Adjustments within Gross profit are recorded within Cost of sales.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 the Company’s Impairment, ERP Implementation and Organization-related and Integration Costs for the third quarter of fiscal year 2020 and ERP Implementation and Integration & Acquisition-Related Costs and the Impact of Tax Legislation for the third quarter of fiscal year 2019.
The Company operates on a global basis and reports financial results in U.S. dollars in accordance with GAAP. Percentage increases/decreases in net sales for the Company and each segment have been presented both including and excluding currency fluctuation effects from translating foreign-denominated sales into U.S. dollars and compared to the same periods in the prior quarter and fiscal year. The Company calculates constant currency revenue results by translating current period revenue in local currency using the prior year period’s currency conversion rate.
Due to fact that 90% of the Company’s stores were closed or operating under shortened operating hours over the course of quarter, net sales changes for the Company and each segment are based on absolute sales dollar changes and are not presented in accordance with the Company’s comparable sales definition utilized in prior quarters.
Management utilizes these non-GAAP and constant currency measures to conduct and evaluate its business during its regular review of operating results for the periods affected and to make decisions about Company resources and performance. The Company believes presenting these non-GAAP measures, which exclude items that are not comparable from period to period, is useful to investors and others in evaluating the Company’s ongoing operating and financial results in a manner that is consistent with management’s evaluation of business performance and understanding how such results compare with the Company’s historical performance. Additionally, the Company believes presenting these metrics on a constant currency basis will help investors and analysts to understand the effect of significant year-over-year foreign currency exchange rate fluctuations on these performance measures and provide a framework to assess how business is performing and expected to perform excluding these effects.
TAPESTRY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS At March 28, 2020 and June 29, 2019 (in millions) (unaudited) (audited) March 28, 2020 June 29, 2019 ASSETS Cash, cash equivalents and short-term investments$ 898.2
$ 1,233.8
Receivables190.4
298.1
Inventories852.9
778.3
Other current assets190.4
246.6
Total current assets2,131.9
2,556.8
Property and equipment, net818.7
938.8
Lease right-of-use assets1,970.9
-
Other noncurrent assets2,821.5
3,381.7
Total assets$ 7,743.0
$ 6,877.3
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable$ 200.1
$ 243.6
Accrued liabilities573.9
673.6
Short-term lease liabilities353.4
-
Current debt11.5
0.8
Total current liabilities1,138.9
918.0
Long-term debt1,587.2
1,601.9
Long-term lease liabilities1,897.3
-
Other liabilities566.5
844.0
Stockholders' equity2,553.1
3,513.4
Total liabilities and stockholders' equity$ 7,743.0
$ 6,877.3
TAPESTRY, INC. STORE COUNT At December 28, 2019 and March 28, 2020 (unaudited) As of As of Directly-Operated Store Count: December 28, 2019 Openings (Closures) March 28, 2020 Coach North America393
-
(12)
381
International596
4
(9)
591
Kate Spade North America222
3
(5)
220
International205
8
(9)
204
Stuart Weitzman North America72
-
(1)
71
International87
-
-
87
View source version on businesswire.com: https://www.businesswire.com/news/home/20200430005276/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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