01—Abstract
Summary
Summary of the 10-Q filed February 6, 2025. Cited figures are marked; the original filing is the authoritative source.
Tapestry, Inc. (TPR) reported net sales of $2,195.4 milliona for the second quarter of fiscal 2025 (ended December 28, 2024), up 5.3% or $110.9 million from $2,084.5 million a year earlier, with growth led by Coach (net sales up 10.9% to $1,709.3 million).
Gross margin rose 280 basis points to 74.4%, attributed primarily to net pricing improvements, and operating income increased 10.1% to $492.8 millionb. Reported net income declined 3.7% to $310.4 million, or $1.38 per diluted share, because of $197.6 million in pre-tax acquisition-related charges tied to the terminated Capri Holdings acquisition, including a $120.1 million loss on extinguishment of debt. Excluding these items, the company reported net income of $450.2 million, or $2.00 per diluted share.
The balance sheet changed substantially during the period. Cash and cash equivalents fell to $983.4 millionc from $6,142.0 million at June 29, 2024, and long-term debt declined to $2,377.4 million from $6,937.2 million, as the company redeemed the Capri Acquisition Senior Notes on November 25, 2024 and repaid other borrowings. Total stockholders' equity dropped to $1,336.5 million from $2,896.9 million, reflecting share repurchases.
Tapestry executed a $2.00 billiond accelerated share repurchase, receiving an initial delivery of 28,363,766 shares at $56.41 per share, and the company issued $1.50 billion of new senior unsecured notes due 2030 and 2035 in December 2024. For the first six months of fiscal 2025, net cash provided by operating activities was $625.5 million, compared with $901.8 million a year earlier. The company also disclosed that the Capri merger was terminated on November 13, 2024, that two putative securities class actions were filed in December 2024 and January 2025 relating to the proposed acquisition, and that the company intends to vigorously defend them.
02—Key points
Key Highlights
- Q2 FY2025 net sales rose 5.3% to $2,195.4 million; Coach grew 10.9% to $1,709.3 million while Kate Spade declined 9.6% to $416.4 million and Stuart Weitzman declined 15.2% to $69.7 million.
- Gross margin expanded 280 basis points to 74.4%, primarily from net pricing improvements; operating margin rose to 22.4% from 21.5%.
- Reported Q2 net income fell 3.7% to $310.4 million ($1.38 diluted EPS); excluding $197.6 million of Capri acquisition-related pre-tax charges, net income was $450.2 million ($2.00 diluted EPS).
- Cash and cash equivalents decreased to $983.4 million from $6,142.0 million, and long-term debt decreased to $2,377.4 million from $6,937.2 million following redemption of the Capri Acquisition Senior Notes.
- Tapestry entered a $2.00 billion accelerated share repurchase agreement in November 2024 and received 28,363,766 shares at $56.41 per share; the company retains $800.0 million of authorization under its 2022 program.
- Following the termination of the Capri merger on November 13, 2024, the FTC dismissed its complaint on December 4, 2024; two securities class actions relating to the proposed acquisition have been filed against Tapestry and Capri.
- Total stockholders' equity fell to $1,336.5 million from $2,896.9 million, and the company reported $1,613.0 million in repurchases of common stock during the six months.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2025, Tapestry kept $0.14.
- Revenue$2.20B100.0%
- Cost of revenue−$562.3M25.6%
- Gross profit$1.63B74.4%
- Operating costs−$1.14B51.9%
- Operating income$492.8M22.4%
- Interest, other & tax−$182.4M8.3%
- Net income$310.4M14.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed February 6, 2025Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $2.20B$2.08B | +5.3% |
| Cost of Revenue | $562.30M$591.30M | −4.9% |
| Gross Profit | $1.63B$1.49B | +9.4% |
| SG&A Expenses | $1.14B$1.05B | +9.1% |
| Operating Income | $492.80M$447.60M | +10.1% |
| Interest Expense | $85.80M$88.60M | −3.2% |
| Net Income | $310.40M$322.30M | −3.7% |
| EPS (Basic) | $1.41$1.41 | 0.0% |
| EPS (Diluted) | $1.38$1.39 | −0.7% |
| Shares Outstanding (Basic) | 219.90M229.30M | −4.1% |
| Shares Outstanding (Diluted) | 224.90M231.70M | −2.9% |
05—Questions
Frequently Asked Questions
Why did reported net income decline despite higher sales and operating income?
Reported net income fell 3.7% to $310.4 million because of $197.6 million in pre-tax charges related to the terminated Capri Holdings acquisition, including a $120.1 million loss on extinguishment of debt and $55.4 million in SG&A expenses. Excluding these items, net income increased 19.5% to $450.2 million.
How did the termination of the Capri acquisition affect Tapestry's balance sheet?
Tapestry redeemed the Capri Acquisition Senior Notes at 101% of principal on November 25, 2024, and terminated the related term loan facilities. Long-term debt declined to $2,377.4 million from $6,937.2 million, and cash and cash equivalents fell to $983.4 million from $6,142.0 million.
What drove the improvement in gross margin?
The filing attributes the 280 basis point increase in gross margin to 74.4% in the second quarter, primarily to net pricing improvements. Coach's gross margin rose 270 basis points mainly due to net pricing improvements, and Kate Spade's rose 180 basis points due to net pricing improvements and lower duty expenses.
How did the brands perform in the second quarter?
Coach net sales increased 10.9% to $1,709.3 million, with operating margin rising to 36.4%. Kate Spade net sales decreased 9.6% to $416.4 million, with operating income of $68.0 million, and Stuart Weitzman net sales decreased 15.2% to $69.7 million, with an operating loss of $1.0 million.
What are the pending legal matters investors should note?
Two putative securities class actions were filed in the U.S. District Court for the District of Delaware on December 23, 2024 and January 28, 2025, alleging misrepresentations related to the Capri acquisition during August 10, 2023 to October 24, 2024. The complaints seek unspecified damages, and the company intends to vigorously defend itself.
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