01—Abstract
Summary
Summary of the 10-Q filed November 9, 2023. Cited figures are marked; the original filing is the authoritative source.
Tapestry, Inc. (TPR) reported first-quarter fiscal 2024 results for the three months ended September 30, 2023.
Net sales were $1,513.2 milliona, up 0.4% or $6.7 million from $1,506.5 million a year earlier, with the company stating that excluding foreign currency, net sales increased 1.7% or $25.8 million. Gross profit rose 4.1% to $1,097.7 million, and gross margin expanded to 72.5% from 70.0%, driven mainly by lower freight costs and net pricing improvements. SG&A expenses rose 5.5% to $844.5 million, and operating income was essentially flat at $253.2 million, versus $254.3 million a year earlier.
Net income was $195.0 millionb, or $0.84 per diluted share, compared with $195.3 million, or $0.79 per diluted share, a year earlier. Excluding $26.3 million of pre-tax Capri Acquisition costs, the company reported non-GAAP diluted EPS of $0.93. The filing is dominated by the proposed acquisition of Capri Holdings Limited, agreed August 10, 2023 for $57.00 per share in cash, with an enterprise value the filing states is expected to be approximately $8.5 billion and a closing expected during calendar 2024.
Capri's shareholders approved the merger on October 25, 2023. To fund it, Tapestry has secured a bridge facility of up to $6.6 billionc (reduced from $8.0 billion), $1.40 billion of new term loans, and a revolving facility increased from $1.25 billion to $2.0 billion. No borrowings were outstanding under these facilities at quarter-end.
Share repurchases were suspended in August 2023 and none occurred during the quarter. At September 30, 2023, cash and cash equivalents were $622.1 milliond, against long-term debt of $1,629.9 million net. Operating cash flow was $75.3 million, compared with a use of $170.4 million a year earlier, and capital expenditures were $20.9 million.
The company paid $80.2 million in dividends. Management stated it believes cash flows, credit lines and on-hand cash will be adequate to fund operations and debt service for fiscal 2024 and beyond.
02—Key points
Key Highlights
- Net sales of $1,513.2 million, up 0.4% year over year; up 1.7% excluding foreign currency effects, per the filing.
- Gross margin rose 250 basis points to 72.5%, primarily from lower freight costs and net pricing improvements.
- Operating income was $253.2 million, down $1.1 million, with operating margin of 16.7% versus 16.9%; excluding $19.6 million of acquisition costs in SG&A, operating income was $272.8 million.
- Diluted EPS of $0.84 (GAAP) versus $0.79; non-GAAP diluted EPS of $0.93 excluding $0.09 of Capri acquisition costs.
- Coach segment operating income rose 9.5% to $371.3 million with operating margin of 32.1%; Kate Spade and Stuart Weitzman results were $26.6 million and a $8.6 million loss, respectively.
- Pending $8.5 billion Capri Holdings acquisition at $57.00 per share in cash, approved by Capri shareholders on October 25, 2023; expected to close in calendar 2024.
- Financing for the Capri deal includes a bridge facility of up to $6.6 billion, $1.40 billion in new term loans, and a $2.0 billion revolver, none drawn at September 30, 2023.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Tapestry kept $0.13.
- Revenue$1.51B100.0%
- Cost of revenue−$415.5M27.5%
- Gross profit$1.10B72.5%
- Operating costs−$844.5M55.8%
- Operating income$253.2M16.7%
- Interest, other & tax−$58.2M3.8%
- Net income$195.0M12.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed November 9, 2023Financial Statements
| Revenue | $1.51B |
| Cost of Revenue | $415.50M |
| Gross Profit | $1.10B |
| SG&A Expenses | $844.50M |
| Operating Income | $253.20M |
| Interest Expense | $22.30M |
| Net Income | $195.00M |
| EPS (Basic) | $0.85 |
| EPS (Diluted) | $0.84 |
| Shares Outstanding (Basic) | 228.30M |
| Shares Outstanding (Diluted) | 232.50M |
05—Questions
Frequently Asked Questions
How did Tapestry perform in the first quarter of fiscal 2024?
Net sales were $1,513.2 million, up 0.4% from $1,506.5 million. Gross profit increased 4.1% to $1,097.7 million, while SG&A rose 5.5% to $844.5 million, leaving operating income roughly flat at $253.2 million and net income at $195.0 million.
What is the status and financing of the Capri Holdings acquisition?
Tapestry agreed on August 10, 2023 to acquire Capri Holdings for $57.00 per share in cash, with an expected enterprise value of approximately $8.5 billion and closing expected in calendar 2024. Capri shareholders approved the merger on October 25, 2023. The company plans to fund it with new permanent financing, new term loans, cash on hand, cash at Capri and future cash flow, and its bridge facility and revolver had no outstanding borrowings at quarter-end.
How much did the Capri deal affect first-quarter results?
The company incurred $26.3 million in pre-tax acquisition costs, of which $19.6 million was recorded in SG&A (mainly professional fees) and $6.7 million in interest expense (financing-related). Net income was reduced by $21.3 million, or $0.09 per diluted share.
How is Tapestry's liquidity and cash position?
Cash and cash equivalents were $622.1 million at September 30, 2023, compared with $726.1 million at July 1, 2023. Operating cash flow was $75.3 million, versus a $170.4 million use a year earlier. Total liabilities were $4,726.8 million and stockholders' equity was $2,415.7 million. The company paid $80.2 million in dividends and did not repurchase shares during the quarter.
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