01—Abstract
Summary
Summary of the 10-K filed August 22, 2012. Cited figures are marked; the original filing is the authoritative source.
Coach, Inc. (now Tapestry, Inc.) reported fiscal 2012 (year ended June 30, 2012) net sales of $4.76 billiona, up 14.5% from $4.16 billion in fiscal 2011, with net income of $1.04 billion and diluted earnings per share of $3.53, up 20.9%.
Gross margin was 72.8% and operating margin was 31.7%. Direct-to-Consumer sales rose 16.1% to $4.23 billionb and represented 88.8% of net sales, while the Indirect segment rose 3.8% to $531.5 million. Comparable store sales in North American stores increased 6.6%.
Excluding items affecting comparability, primarily charitable foundation contributions, operating income rose 16.6% to $1.55 billionc. The company ended the year with cash and cash equivalents of $917.2 million, no outstanding borrowings under its $400 million JP Morgan revolving credit facility, and stockholders' equity of $1.99 billion. It repurchased $700 million of common stock during the year and paid dividends of $260.3 million in cash.
The quarterly dividend was raised 33% to an expected annual rate of $1.20d per share starting with the July 2, 2012 payment. Management plans to open about 10 net new North American retail stores and 18 factory outlets in fiscal 2013, roughly 30 new locations in China, and about 13 net new locations in Japan, with capital expenditures expected to be about $250 million.
The filing highlights risks including weak consumer discretionary spending in recessionary periods, the execution of international expansion (including the take-over of retail operations in Taiwan, Malaysia and South Korea), intense competition, counterfeiting, global sourcing cost pressures, and dependence on the holiday season in the second fiscal quarter. The company also notes it is dual-listed, with Hong Kong Depositary Receipts trading on the Hong Kong Stock Exchange since December 2011.
02—Key points
Key Highlights
- Net sales rose 14.5% to $4.76 billion in fiscal 2012, led by a 16.1% increase in Direct-to-Consumer sales to $4.23 billion.
- Diluted earnings per share rose 20.9% to $3.53, and net income reached $1.04 billion.
- Gross margin was 72.8% and operating margin was 31.7%, with SG&A at 41.0% of net sales.
- North American comparable store sales increased 6.6%, and the company opened 9 net new retail stores and 26 new factory stores in North America.
- The company is essentially debt-free, with no borrowings under its $400 million revolving credit facility and cash and cash equivalents of $917.2 million at June 30, 2012.
- Shareholder returns included $700 million in share repurchases and a 33% increase in the quarterly dividend to an expected annual rate of $1.20 per share.
- Management plans fiscal 2013 capital expenditures of about $250 million and roughly 30 new China locations, with international expansion into Europe and Latin America.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Tapestry kept $0.22.
- Revenue$4.76B100.0%
- Cost of revenue−$1.30B27.2%
- Gross profit$3.47B72.8%
- Operating costs−$1.95B41.0%
- Operating income$1.51B31.7%
- Interest, other & tax−$473.1M9.9%
- Net income$1.04B21.8%
Where FY2012 revenue went
$4.76B- SG&A: $1.95B, 41% of revenue
- Cost of revenue: $1.30B, 27% of revenue
- Net income: $1.04B, 22% of revenue
- Interest, other & tax: $473.1M, 9.9% of revenue
Kept 22% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed August 22, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $4.76B$4.16B | +14.5% |
| Cost of Revenue | $1.30B$1.13B | +14.3% |
| Gross Profit | $3.47B$3.02B | +14.6% |
| SG&A Expenses | $1.95B$1.72B | +13.7% |
| Operating Income | $1.51B$1.30B | +15.9% |
| Net Income | $1.04B$880.80M | +18.0% |
| EPS (Basic) | $3.60$2.99 | +20.4% |
| EPS (Diluted) | $3.53$2.92 | +20.9% |
| Shares Outstanding (Basic) | 288.28M294.88M | −2.2% |
| Shares Outstanding (Diluted) | 294.13M301.56M | −2.5% |
05—Questions
Frequently Asked Questions
How did Coach's sales and profitability perform in fiscal 2012?
Net sales rose 14.5% to $4.76 billion, operating income rose 15.9% to $1.51 billion, and net income rose 17.9% to $1.04 billion. Diluted earnings per share increased 20.9% to $3.53. Excluding items affecting comparability of $39.2 million, operating income rose 16.6% to $1.55 billion.
Which business segment drove growth?
The Direct-to-Consumer segment drove growth, with net sales up 16.1% to $4.23 billion, or 88.8% of total net sales. The Indirect segment grew 3.8% to $531.5 million. The filing attributes Direct-to-Consumer growth to Company-operated stores in North America and China.
What capital returns did the company make to shareholders?
During fiscal 2012 the company repurchased and retired $700 million of common stock and paid $260.3 million in dividend payments. The quarterly dividend was increased to an expected annual rate of $1.20 per share starting with the July 2, 2012 payment, and $261.6 million remained available under the $1.5 billion repurchase program.
What are the main risks identified in the filing?
Key risks include reduced consumer spending on discretionary luxury items during economic downturns, the execution of international expansion where the company has limited direct operating experience, intense competition from European and American luxury brands, counterfeiting, global sourcing cost increases, and seasonal sales concentration in the second fiscal quarter.
What growth plans does management outline for fiscal 2013?
Management expects to open about 10 net new North American retail stores and 18 factory outlets, about 30 new China locations, and about 13 net new Japan locations. It also plans capital expenditures of approximately $250 million and expansion into Latin America through distributor partners.
06—Continue