01—Abstract
Summary
Summary of the 10-K filed August 15, 2019. Cited figures are marked; the original filing is the authoritative source.
Tapestry, Inc. (NYSE: TPR) reported fiscal 2019 (52 weeks ended June 29, 2019) net sales of $6.03 billiona, up 2.5% or $147.1 million from $5.88 billion in fiscal 2018.
Gross margin rose to 67.3% from 65.5%, and operating income increased 21.4% to $814.1 millionb. Net income was $643.4 million, or $2.21 per diluted share, compared with $397.5 million, or $1.38 per diluted share, in fiscal 2018. The prior year included larger integration and acquisition charges tied to the Kate Spade acquisition, and the company reports non-GAAP net income of $748.7 million, or $2.57 per diluted share, down 2.2% from $2.63 in fiscal 2018 excluding those items.
Coach generated $4.27 billionc of net sales (70.9% of the total), Kate Spade $1.37 billion (22.7%), and Stuart Weitzman $389.4 million (6.4%). Stuart Weitzman posted an operating loss of $51.2 million amid supply chain challenges, while Kate Spade's operating income rose to $165.7 million.
Cash and cash equivalents ended the year at $969.2 milliond, against total debt of about $1.6 billion and an undrawn $900 million revolving credit facility. Management cited a more promotional retail environment, softer global traffic, U.S.-China tariff increases, and Brexit uncertainty as risks for fiscal 2020, and the Board authorized a $1.00 billion share repurchase program in May 2019, of which $100.0 million was used in fiscal 2019.
02—Key points
Key Highlights
- Net sales rose 2.5% to $6.03 billion, with growth excluding currency effects of 3.6% to $6,029 million-equivalent increase of $213.8 million, and increases across all brands on that basis.
- Operating income increased 21.4% to $814.1 million, and operating margin improved to 13.5% from 11.4%, though non-GAAP operating income fell 4.7% to $945.4 million.
- Diluted EPS was $2.21 versus $1.38 a year earlier; excluding non-GAAP items, diluted EPS was $2.57 versus $2.63.
- Coach accounted for 70.9% of net sales and grew operating income 2.8% to $1.15 billion, while Stuart Weitzman swung to an operating loss of $51.2 million.
- Cash flow from operations was $791.7 million and capital expenditures were $274.2 million; cash and equivalents declined $274.2 million to $969.2 million.
- Management expects fiscal 2020 capital expenditures of about $300 million, integration charges of $20 to $30 million, and ERP-related charges of $30 to $40 million.
- The Board authorized a $1.00 billion share repurchase program on May 9, 2019, and quarterly dividends were $1.350 per share for the year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Tapestry kept $0.11.
- Revenue$6.03B100.0%
- Cost of revenue−$1.97B32.7%
- Gross profit$4.05B67.3%
- Operating costs−$3.23B53.7%
- Operating income$819.7M13.6%
- Interest, other & tax−$176.3M2.9%
- Net income$643.4M10.7%
Where FY2019 revenue went
$6.03B- SG&A: $3.23B, 54% of revenue
- Cost of revenue: $1.97B, 33% of revenue
- Net income: $643.4M, 11% of revenue
- Interest, other & tax: $176.3M, 2.9% of revenue
Kept 11% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed August 15, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $6.03B$5.88B | +2.5% |
| Cost of Revenue | $1.97B$2.03B | −2.9% |
| Gross Profit | $4.05B$3.85B | +5.3% |
| SG&A Expenses | $3.23B$3.18B | +1.8% |
| Operating Income | $819.70M$672.00M | +22.0% |
| Interest Expense | $66.90M$86.30M | −22.5% |
| Net Income | $643.40M$397.50M | +61.9% |
| EPS (Basic) | $2.22$1.39 | +59.7% |
| EPS (Diluted) | $2.21$1.38 | +60.1% |
| Shares Outstanding (Basic) | 289.40M285.40M | +1.4% |
| Shares Outstanding (Diluted) | 290.80M288.60M | +0.8% |
05—Questions
Frequently Asked Questions
How did Tapestry perform financially in fiscal 2019?
Net sales were $6.03 billion, up 2.5% from $5.88 billion. Net income was $643.4 million, or $2.21 per diluted share, compared with $397.5 million, or $1.38 per diluted share, in fiscal 2018. Operating income reached $814.1 million, a 21.4% increase, with operating margin of 13.5%.
Which brand drives the most revenue, and how did each segment perform?
Coach generated $4.27 billion, or 70.9% of net sales, with operating income of $1.15 billion. Kate Spade had net sales of $1.37 billion and operating income of $165.7 million, versus an operating loss in fiscal 2018. Stuart Weitzman had net sales of $389.4 million but an operating loss of $51.2 million, reflecting supply chain challenges and higher SG&A expenses.
What are the key risks the filing highlights?
The filing cites a highly promotional retail environment, declining mall and store traffic, tariffs on Chinese imports (raised from 10% to 25% on $200 billion of goods in May 2019, with a further 10% proposed on $300 billion), Brexit uncertainty, foreign currency fluctuations, and the risks of the multi-year ERP implementation. About 43.7% of net sales came from outside the United States.
How much debt does Tapestry carry and what liquidity does it have?
Consolidated indebtedness was approximately $1.6 billion as of June 29, 2019, consisting mainly of senior notes due 2022, 2025 and 2027. The company had $969.2 million of cash and cash equivalents, $264.6 million of short-term investments, and an undrawn $900 million revolving credit facility maturing May 30, 2022.
What is the company's capital return policy?
Tapestry paid dividends of $390.7 million in fiscal 2019 at $1.350 per share and repurchased $100.0 million of common stock. The Board authorized a program of up to $1.00 billion on May 9, 2019, with $900.0 million remaining at the end of the fourth quarter.
06—Continue