01—Abstract
Summary
Summary of the 10-K filed August 15, 2024. Cited figures are marked; the original filing is the authoritative source.
Tapestry, Inc. (NYSE: TPR) reported fiscal 2024 (52 weeks ended June 29, 2024) net sales of $6.67 billiona, up 0.2% or $10.3 million from $6.66 billion in fiscal 2023, with growth of 1.3% excluding currency effects.
Gross margin rose 250 basis points to 73.3%, and operating income declined 2.8% to $1.14 billionb, with operating margin of 17.1%. Net income fell 12.8% to $816.0 million, or $3.50 per diluted share, reflecting $226.6 million of pre-tax acquisition costs tied to the proposed Capri Holdings acquisition. Excluding those items, net income was $1.00 billion, or $4.29 per diluted share.
Coach generated 76.4% of net sales, Kate Spade 20.0% and Stuart Weitzman 3.6%. The most significant item for investors is the pending $8.50 billionc enterprise value acquisition of Capri Holdings Limited at $57.00 per share in cash. Tapestry issued $4.50 billion of U.S. dollar senior notes and EUR 1.50 billion of euro notes in November 2023 to finance it, and cash and cash equivalents rose to $6.14 billion at year-end, while total debt reached roughly $7.24 billion.
The Federal Trade Commission filed a preliminary injunction action on April 22, 2024 to block the deal, and the company says it has received approvals everywhere except the United States and intends to defend the lawsuit vigorously. If the acquisition is not completed by February 10, 2025 (or a later mutually agreed date), the acquisition notes must be redeemed at 101% of principal. The company suspended share repurchases in August 2023 and paid dividends of $1.40d per share, or $321 million, during fiscal 2024.
Operating cash flow was $1.26 billion, up from $975.2 million, and the company's futurespeed 2025 growth strategy continues to prioritize lasting customer relationships, product innovation, omni-channel experiences and global growth. Direct-to-consumer revenues were approximately 87% of net sales and wholesale approximately 12%. Store count declined by 27 to 1,402 locations.
02—Key points
Key Highlights
- Net sales of $6.67 billion, up 0.2% from $6.66 billion in fiscal 2023; up 1.3% excluding currency effects
- Gross margin increased 250 basis points to 73.3%, driven mainly by lower freight costs, net pricing improvements and favorable currency impacts
- Operating income of $1.14 billion (17.1% margin) versus $1.17 billion, including $109.9 million of acquisition-related SG&A costs; non-GAAP operating income of $1.25 billion
- Net income of $816.0 million, or $3.50 per diluted share, versus $3.88 in fiscal 2023; non-GAAP diluted EPS of $4.29
- Pending Capri Holdings acquisition at $57.00 per share in cash (enterprise value about $8.50 billion), blocked by an FTC preliminary injunction action filed April 22, 2024
- Cash and cash equivalents of $6.14 billion at June 29, 2024, against long-term debt of $6.94 billion plus $303.4 million current debt, largely from the Capri Acquisition Senior Notes
- Coach segment represented 76.4% of net sales with operating margin of 32.4%; Kate Spade operating margin was 9.9% and Stuart Weitzman posted an operating loss of $21.2 million
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2024, Tapestry kept $0.12.
- Revenue$6.67B100.0%
- Cost of revenue−$1.78B26.7%
- Gross profit$4.89B73.3%
- Operating costs−$3.75B56.2%
- Operating income$1.14B17.1%
- Interest, other & tax−$324.1M4.9%
- Net income$816.0M12.2%
Where FY2024 revenue went
$6.67B- SG&A: $3.75B, 56% of revenue
- Cost of revenue: $1.78B, 27% of revenue
- Net income: $816.0M, 12% of revenue
- Interest, other & tax: $324.1M, 4.9% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2024filed August 15, 2024Financial Statements
FY2024 against FY2023
| Line item | FY2024FY2023 | Change |
|---|---|---|
| Revenue | $6.67B$6.66B | +0.2% |
| Cost of Revenue | $1.78B$1.95B | −8.4% |
| Gross Profit | $4.89B$4.71B | +3.7% |
| SG&A Expenses | $3.75B$3.54B | +5.8% |
| Operating Income | $1.14B$1.17B | −2.8% |
| Interest Expense | $369.60M$72.80M | +407.7% |
| Net Income | $816.00M$936.00M | −12.8% |
| EPS (Basic) | $3.56$3.96 | −10.1% |
| EPS (Diluted) | $3.50$3.88 | −9.8% |
| Shares Outstanding (Basic) | 229.20M236.40M | −3.0% |
| Shares Outstanding (Diluted) | 233.20M241.30M | −3.4% |
05—Questions
Frequently Asked Questions
What is the status of the Capri Holdings acquisition?
The company has received regulatory approval from all applicable jurisdictions except the United States. The FTC filed a complaint on April 22, 2024 in the U.S. District Court for the Southern District of New York seeking to enjoin the deal under Section 7 of the Clayton Act and Section 5 of the FTC Act. Tapestry believes the claims are without merit and intends to defend the lawsuit vigorously. The deal is expected to close during calendar year 2024, and the Merger Agreement may be terminated if it is not consummated by August 10, 2024, subject to two extensions of up to three months each in certain circumstances.
How did profitability change in fiscal 2024?
Gross profit rose 3.7% to $4.89 billion and gross margin increased to 73.3% from 70.8%. SG&A expenses rose 5.8% to $3.75 billion, or 56.2% of net sales, including $109.9 million of acquisition costs. Operating income decreased 2.8% to $1.14 billion. Excluding items affecting comparability, operating income increased $77.6 million to $1.25 billion. Net income fell 12.8% to $816.0 million, mainly because interest expense, net, rose to $125.0 million from $27.6 million.
What debt did Tapestry take on, and what happens if the acquisition fails?
In November 2023 Tapestry issued $4.50 billion of U.S. dollar senior unsecured notes and EUR 1.50 billion of euro notes, and it has $1.40 billion of Capri Acquisition Term Loan Facilities that remained unfunded at year-end. Total consolidated debt was approximately $7.24 billion as of June 29, 2024. If the acquisition is not completed by February 10, 2025 (or a later mutually agreed date), or if the Merger Agreement is terminated, the Capri Acquisition Senior Notes must be redeemed at 101% of principal plus accrued interest.
What returns are shareholders receiving?
Tapestry paid a quarterly cash dividend of $0.35 per share, or $1.40 per share annually, totaling $321 million in fiscal 2024. The company suspended share repurchases in August 2023 in connection with the Capri merger agreement and repurchased no shares during fiscal 2024. About $800 million remained available under the 2022 Share Repurchase Program. The Board may decrease or discontinue the dividend at any time.
How is the business performing by brand and channel?
Coach net sales increased 2.7% to $5.10 billion, or 4.1% excluding currency. Kate Spade net sales decreased 6.0% to $1.33 billion, and Stuart Weitzman net sales decreased 14.2% to $241.5 million. Direct-to-consumer revenues were approximately 87% of net sales and wholesale approximately 12%. Total store count fell to 1,402 from 1,429. Stores in North America fell to 555 from 571.
06—Continue