01—Abstract
Summary
Summary of the 10-K filed August 19, 2021. Cited figures are marked; the original filing is the authoritative source.
Tapestry, Inc. (TPR) reported fiscal 2021, a 53-week year ended July 3, 2021, with net sales of $5.75 billiona, up 15.8% or $784.9 million from $4.96 billion in fiscal 2020.
Gross margin rose to 71.0% from 65.3%, and operating income was $968.0 millionb, compared with an operating loss of $550.8 million in fiscal 2020, which included $1.17 billion of impairment charges... The 53rd week contributed incremental net revenues of $92.7 million. Net income was $834.2 million, or $2.95 per diluted share, versus a net loss of $652.1 million, or $(2.34) per share, in fiscal 2020.
Results were helped by a $95.0 millionc CARES Act tax benefit, most notably from an NOL carryback claim. Excluding items affecting comparability, net income was $841.1 million, or $2.97 per diluted share. Coach generated $4.25 billion of net sales, or 74.0% of the total, with segment operating income of $1.31 billion.
Kate Spade had $1.21 billiond of net sales and operating income of $108.5 million, and Stuart Weitzman had $283.2 million of net sales and an operating loss of $8.6 million. Under the Acceleration Program, the company achieved approximately $200 million of gross run-rate expense savings in fiscal 2021 and remains on track for $300 million. It expects total pre-tax charges of approximately $205 to $220 million under the program, which is expected to be substantially complete by the end of fiscal 2022.
Liquidity improved substantially. Cash and cash equivalents rose to $2,007.7 million from $1,426.3 million, and the company repaid the $700 million drawn on its revolving credit facility during fiscal 2021.
Total debt was $1.6 billion, and the revolver had $900 million of capacity. The company reinstated its shareholder return program, declared a quarterly dividend of $0.25 per share payable September 27, 2021, and intends to repurchase approximately $500.0 million of stock in fiscal 2022.
02—Key points
Key Highlights
- Net sales rose 15.8% to $5,746.3 million, including $92.7 million from the 53rd week; Coach grew 20.6% to $4,253.1 million.
- Gross margin expanded to 71.0% from 65.3%, and operating income reached $968.0 million versus a $550.8 million operating loss in fiscal 2020.
- Diluted EPS was $2.95 versus $(2.34) a year earlier; excluding items affecting comparability, diluted EPS was $2.97 versus $0.97.
- Acceleration Program delivered approximately $200 million of gross run-rate expense savings in fiscal 2021, with $300 million targeted.
- Cash rose to $2,007.7 million, and the $700 million revolver draw was fully repaid during fiscal 2021.
- Shareholder returns resumed: a $0.25 quarterly dividend was declared and about $500.0 million of stock repurchases are planned for fiscal 2022.
- Kate Spade and Stuart Weitzman face continued pressure in some areas, with Stuart Weitzman posting an operating loss of $8.6 million despite a turnaround in gross margin.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Tapestry kept $0.15.
- Revenue$5.75B100.0%
- Cost of revenue−$1.66B29.0%
- Gross profit$4.08B71.0%
- Operating costs−$3.11B54.2%
- Operating income$968.0M16.8%
- Interest, other & tax−$133.8M2.3%
- Net income$834.2M14.5%
Where FY2021 revenue went
$5.75B- SG&A: $3.11B, 54% of revenue
- Cost of revenue: $1.66B, 29% of revenue
- Net income: $834.2M, 15% of revenue
- Interest, other & tax: $133.8M, 2.3% of revenue
Kept 15% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed August 19, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $5.75B$4.96B | +15.8% |
| Cost of Revenue | $1.66B$1.72B | −3.4% |
| Gross Profit | $4.08B$3.24B | +26.0% |
| SG&A Expenses | $3.11B— | — |
| Operating Income | $968.00M-$550.80M | +275.7% |
| Interest Expense | $73.50M$71.50M | +2.8% |
| Net Income | $834.20M-$652.10M | +227.9% |
| EPS (Basic) | $3.00$-2.34 | +228.2% |
| EPS (Diluted) | $2.95$-2.34 | +226.1% |
| Shares Outstanding (Basic) | 277.90M278.60M | −0.3% |
| Shares Outstanding (Diluted) | 283.00M278.60M | +1.6% |
05—Questions
Frequently Asked Questions
What drove the swing from a fiscal 2020 loss to fiscal 2021 profit?
Fiscal 2020 included $477.7 million of goodwill and intangible impairments and large Covid-19-related charges, while fiscal 2021 benefited from higher gross profit ($4,081.9 million versus $3,239.3 million) and lower SG&A expenses ($3,113.9 million versus $3,790.1 million). Net income also reflected a $95.0 million CARES Act tax benefit.
How much debt does Tapestry carry, and what liquidity does it have?
Consolidated indebtedness was approximately $1.6 billion as of July 3, 2021, consisting of 3.000% notes due 2022, 4.250% notes due 2025 and 4.125% notes due 2027. Cash and cash equivalents were $2,007.7 million, and the $900 million revolving credit facility was undrawn. The filing states the company must maintain $700 million of available liquidity through October 2, 2021 under the credit amendment.
What is the outlook for capital allocation and capital spending?
The company declared a quarterly dividend of $0.25 per share payable September 27, 2021, and intends to repurchase approximately $500.0 million of stock in fiscal 2022, with $600.0 million remaining under its authorization. It expects total capital expenditures of approximately $220 million in fiscal 2022, prioritizing digital capabilities.
Which brand is driving growth, and which is struggling?
Coach drove growth, with net sales up 20.6% to $4,253.1 million and operating margin of 30.9%. Kate Spade grew 5.3% to $1,210.0 million with a 9.0% operating margin. Stuart Weitzman net sales fell 1.0% to $283.2 million and it posted an operating loss of $8.6 million.
06—Continue