01—Abstract
Summary
Summary of the 10-K filed August 17, 2023. Cited figures are marked; the original filing is the authoritative source.
Tapestry, Inc. (NYSE: TPR) reported fiscal 2023 (52 weeks ended July 1, 2023) net sales of $6.66 billiona, down 0.4% or $23.6 million from $6.68 billion in fiscal 2022, while net income rose to $936.0 million from $856.3 million and diluted EPS increased to $3.88 from $3.17.
Growth came from the Coach brand, whose net sales rose 0.8% to $4.96 billionb (4.5% excluding currency effects), offset by declines at Kate Spade (down 1.8% to $1.42 billion) and Stuart Weitzman (down 11.4% to $281.6 million). Gross margin expanded 120 basis points to 70.8%, primarily from lower freight costs and net pricing improvements, but SG&A rose to 53.1% of net sales, leaving operating margin flat at 17.6%. Operating income was $1.17 billion.
The company ended the year with cash and cash equivalents of $726.1 millionc and consolidated indebtedness of about $1.67 billion. Cash from operations was $975.2 million, and capital expenditures were $184.2 million. Tapestry repurchased $700 million of stock and paid $283.3 million in dividends.
Management introduced its 2025 growth strategy, "futurespeed," in fiscal 2023. After the fiscal year end, on August 10, 2023, Tapestry agreed to acquire Capri Holdings Limited for $57.00d per share in cash, an expected total purchase price of about $8.5 billion, with closing expected during calendar 2024.
The acquisition is supported by a $8.0 billion bridge loan commitment, and completion is subject to Capri shareholder approval and antitrust clearances. Investors should weigh the proposed deal's potential leverage and integration risks alongside the company's strong cash generation and shareholder returns.
02—Key points
Key Highlights
- Net sales were $6.66 billion, down 0.4% from $6.68 billion; excluding currency effects, net sales increased 2.9%.
- Gross margin rose 120 basis points to 70.8%, driven by lower freight costs, net pricing improvements and favorable geography mix.
- Net income increased to $936.0 million from $856.3 million; diluted EPS rose to $3.88 from $3.17.
- Coach segment net sales increased 0.8% to $4.96 billion and segment operating margin rose to 30.8%; Kate Spade operating margin fell to 8.1% and Stuart Weitzman posted an operating loss of $6.7 million.
- Shareholder returns totaled roughly $983 million: $700 million in share repurchases and $283.3 million in dividends, with $800 million remaining under the 2022 repurchase program.
- Consolidated indebtedness was about $1.67 billion at year end, with cash and cash equivalents of $726.1 million.
- On August 10, 2023, Tapestry agreed to acquire Capri Holdings Limited at $57.00 per share in cash, an expected purchase price of about $8.5 billion, supported by an $8.0 billion bridge facility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Tapestry kept $0.14.
- Revenue$6.66B100.0%
- Cost of revenue−$1.95B29.2%
- Gross profit$4.71B70.8%
- Operating costs−$3.54B53.2%
- Operating income$1.17B17.6%
- Interest, other & tax−$236.4M3.5%
- Net income$936.0M14.1%
Where FY2023 revenue went
$6.66B- SG&A: $3.54B, 53% of revenue
- Cost of revenue: $1.95B, 29% of revenue
- Net income: $936.0M, 14% of revenue
- Interest, other & tax: $236.4M, 3.5% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed August 17, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $6.66B$6.68B | −0.4% |
| Cost of Revenue | $1.95B$2.03B | −4.3% |
| Gross Profit | $4.71B$4.65B | +1.4% |
| SG&A Expenses | $3.54B$3.47B | +2.0% |
| Operating Income | $1.17B$1.18B | −0.3% |
| Interest Expense | $72.80M$68.80M | +5.8% |
| Net Income | $936.00M$856.00M | +9.3% |
| EPS (Basic) | $3.96$3.24 | +22.2% |
| EPS (Diluted) | $3.88$3.17 | +22.4% |
| Shares Outstanding (Basic) | 236.40M264.30M | −10.6% |
| Shares Outstanding (Diluted) | 241.30M270.10M | −10.7% |
05—Questions
Frequently Asked Questions
How did Tapestry perform financially in fiscal 2023?
Net sales were $6.66 billion, a 0.4% decline from fiscal 2022, but excluding currency effects they increased 2.9%. Gross margin improved to 70.8% and net income rose to $936.0 million, or $3.88 per diluted share, compared with $856.3 million, or $3.17 per diluted share, a year earlier.
Which brands drove results?
Coach was the largest contributor, with net sales of $4.96 billion (up 0.8%) and segment operating income of $1.53 billion, a 30.8% operating margin. Kate Spade net sales fell 1.8% to $1.42 billion, with operating margin dropping to 8.1%. Stuart Weitzman net sales fell 11.4% to $281.6 million and it posted an operating loss of $6.7 million.
What is the proposed Capri Holdings acquisition?
On August 10, 2023, Tapestry agreed to acquire Capri Holdings Limited for $57.00 per share in cash, with an expected purchase price of about $8.5 billion and closing expected during calendar 2024. Tapestry intends to fund the deal with senior notes, term loans and excess cash, backed by an $8.0 billion bridge loan commitment. Completion depends on Capri shareholder approval and antitrust clearances.
How much did Tapestry return to shareholders and what is its debt position?
In fiscal 2023 Tapestry repurchased $700 million of common stock and paid $283.3 million in dividends, at an annual rate of $1.20 per share. Consolidated indebtedness was about $1.67 billion as of July 1, 2023, and the company had $726.1 million in cash and cash equivalents. Its $1.25 billion revolving credit facility had no outstanding borrowings.
What are the main risks highlighted in the filing?
Key risks include economic conditions and reduced discretionary luxury spending, international exposure (about 39.3% of net sales came from outside the United States), currency fluctuations, competition, cyber security threats, and supply chain and tariff changes. The filing also flags the increased indebtedness and integration risks tied to the Capri acquisition, and a Kate Spade goodwill and brand intangible headroom of about 20% and 40%, respectively, which could be affected by future performance.
06—Continue