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Tapestry (TPR) Beats on Q2 Earnings, Lifts FY22 Outlook
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In spite of a challenging backdrop, Tapestry, Inc. (TPR - Free Report) reported stronger-than-anticipated second-quarter fiscal 2022 results, thanks to stellar demand and strong customer engagement. This house of modern luxury accessories and lifestyle brands witnessed significant improvement in sales trends that even surpassed pre-pandemic levels. Also, the company attained a meaningful improvement in earnings per share on a year-over-year basis. Markedly, robust underlying business trends and impressive performance prompted management to raise revenues and earnings per share view for the fiscal year.
Joanne Crevoiserat, CEO, said, “We delivered record sales this holiday quarter, highlighted by an inflection at Kate Spade, ongoing momentum at Coach, and a return to pre-pandemic revenue levels at Stuart Weitzman.”
Sales & Earnings Picture
Tapestry posted second-quarter adjusted earnings of $1.33 per share that comfortably surpassed the Zacks Consensus Estimate of $1.19. Remarkably, the bottom line improved from adjusted earnings of $1.15 per share reported in the year-ago period owing to higher net sales.
Net sales of this New York-based company came in at $2,141.2 million, ahead of the Zacks Consensus Estimate of $1,991 million. The metric soared 27% on a year-over-year basis driven by growth across brands. Net sales advanced 18% compared to pre-pandemic levels. Strength in North America as well as sustained growth in Digital and China contributed to this upbeat performance. Notably, the company added nearly 3 million new customers across channels in North America.
Tapestry now envisions revenues to be approximately $6.75 billion for fiscal 2022, up from the prior view of $6.6 billion. This suggests growth of roughly 20% versus the prior year on a 52-week, comparable basis. The company projected earnings in the band of $3.60-$3.65 per share, ahead of the earlier view of $3.45-$3.50. The current projection suggests a sharp increase from adjusted earnings of $2.97 per share reported in fiscal 2021.
Tapestry’s impressive performance validates significant progress on previously announced Acceleration Program. The program aims at transforming into a leaner and more responsive organization, building significant data and analytics capabilities with focus on e-commerce channels, and operating with a clearly defined path and strategy for each brand. The company also remains on track to realize gross run-rate savings of $300 million in fiscal 2022.
For the second quarter, net sales for Coach came in at $1,525 million, up 24% year over year. Kate Spade sales came in at $500.4 million, surging 33% from the year-ago period. Net sales for Stuart Weitzman totaled $115.8 million, reflecting an increase of 37% year over year.
Tapestry continued with its sturdy e-commerce performance with global digital sales rising about 30% compared with the prior-year period and nearly tripled compared to pre-pandemic levels. The company registered mid-single-digit year-over-year growth in sales in Mainland China and more than 35% versus pre-pandemic levels. Sales in North America surged more than 35% versus the prior-year quarter and over 25% compared with pre-pandemic levels.
Margin Discussions
Consolidated gross profit came in at $1,457.4 million, up 24% from the year-ago period. However, gross margin contracted 150 basis points to 68.1%. Management informed that gross margin was adversely impacted by higher freight cost in order to maintain product flow, which totaled 320 basis points.
Further, the company reported adjusted operating income of $476.1 million, up from adjusted operating income of $411.1 million in the prior-year quarter. Meanwhile, adjusted operating margin shrunk 220 basis points to 22.2%.
We note that adjusted SG&A expenses rose 29% year over year to $981.3 million. Again, as a percentage of net sales, SG&A expenses increased to 45.8% from 45.2% in the year-ago period.
Store Update
At the end of the quarter, Tapestry operated 354 Coach stores, 209 Kate Spade outlets and 43 Stuart Weitzman stores in North America. Internationally, the count was 600, 192 and 57 for Coach, Kate Spade and Stuart Weitzman, respectively.
Other Financial Details
Tapestry ended the quarter with cash, cash equivalents and short-term investments of $1,647.7 million, long-term debt of $1,189.1 million and stockholders' equity of $2,927.4 million. The company expects to pay down its July 2022 bonds, totaling $400 million, by the end of the current fiscal year.
Free cash flow year-to-date was an inflow of $596 million. The company incurred capital expenditures of $72 million in the year-to-date period. For fiscal 2022, management anticipates capital expenditures of about $200 million.
Tapestry intends to buyback approximately $1.25 billion worth of shares in fiscal 2022, up from the prior expectation of $1 billion. The company repurchased shares worth $500 million in the second quarter. As of quarter-end, $850 million remained under the current share repurchase authorization.
Shares of this Zacks Rank #2 (Buy) company have increased 4.1% in the past year against the Retail - Apparel And Shoes industry’s decline of 32.1%.
Pick These 3 Stocks Too
Here are three more favorably ranked stocks — DICK'S Sporting Goods (DKS - Free Report) , Capri Holdings (CPRI - Free Report) and Wolverine World Wide (WWW - Free Report) .
DICK'S Sporting Goods, which operates as a sporting goods retailer, sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 104.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for DICK'S Sporting Goods’ current financial year sales and EPS suggests growth of 27.8% and 151.6%, respectively, from the year-ago period. DKS has an expected EPS growth rate of 11.7% for three-five years.
Capri Holdings, a global fashion luxury group, flaunts a Zacks Rank #1. The company’s bottom line has outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters.
The Zacks Consensus Estimate for Capri Holdings’ current financial year sales and EPS suggests growth of 37.1% and 215.8%, respectively, from the year-ago period. CPRI has an expected EPS growth rate of 30.9% for three-five years.
Wolverine World Wide, one of the leading marketers and licensors of a branded casual, active lifestyle, work, outdoor sport, athletic, children's and uniform footwear and apparel, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 18.3%, on average.
The Zacks Consensus Estimate for Wolverine World Wide’s current financial year sales and EPS suggests growth of 34.4% and 125.8%, respectively, from the year-ago period. WWW has an expected EPS growth rate of 10% for three-five years.
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Tapestry (TPR) Beats on Q2 Earnings, Lifts FY22 Outlook
In spite of a challenging backdrop, Tapestry, Inc. (TPR - Free Report) reported stronger-than-anticipated second-quarter fiscal 2022 results, thanks to stellar demand and strong customer engagement. This house of modern luxury accessories and lifestyle brands witnessed significant improvement in sales trends that even surpassed pre-pandemic levels. Also, the company attained a meaningful improvement in earnings per share on a year-over-year basis. Markedly, robust underlying business trends and impressive performance prompted management to raise revenues and earnings per share view for the fiscal year.
Joanne Crevoiserat, CEO, said, “We delivered record sales this holiday quarter, highlighted by an inflection at Kate Spade, ongoing momentum at Coach, and a return to pre-pandemic revenue levels at Stuart Weitzman.”
Sales & Earnings Picture
Tapestry posted second-quarter adjusted earnings of $1.33 per share that comfortably surpassed the Zacks Consensus Estimate of $1.19. Remarkably, the bottom line improved from adjusted earnings of $1.15 per share reported in the year-ago period owing to higher net sales.
Net sales of this New York-based company came in at $2,141.2 million, ahead of the Zacks Consensus Estimate of $1,991 million. The metric soared 27% on a year-over-year basis driven by growth across brands. Net sales advanced 18% compared to pre-pandemic levels. Strength in North America as well as sustained growth in Digital and China contributed to this upbeat performance. Notably, the company added nearly 3 million new customers across channels in North America.
Tapestry now envisions revenues to be approximately $6.75 billion for fiscal 2022, up from the prior view of $6.6 billion. This suggests growth of roughly 20% versus the prior year on a 52-week, comparable basis. The company projected earnings in the band of $3.60-$3.65 per share, ahead of the earlier view of $3.45-$3.50. The current projection suggests a sharp increase from adjusted earnings of $2.97 per share reported in fiscal 2021.
Tapestry, Inc. Price, Consensus and EPS Surprise
Tapestry, Inc. price-consensus-eps-surprise-chart | Tapestry, Inc. Quote
Let’s Take an Insight
Tapestry’s impressive performance validates significant progress on previously announced Acceleration Program. The program aims at transforming into a leaner and more responsive organization, building significant data and analytics capabilities with focus on e-commerce channels, and operating with a clearly defined path and strategy for each brand. The company also remains on track to realize gross run-rate savings of $300 million in fiscal 2022.
For the second quarter, net sales for Coach came in at $1,525 million, up 24% year over year. Kate Spade sales came in at $500.4 million, surging 33% from the year-ago period. Net sales for Stuart Weitzman totaled $115.8 million, reflecting an increase of 37% year over year.
Tapestry continued with its sturdy e-commerce performance with global digital sales rising about 30% compared with the prior-year period and nearly tripled compared to pre-pandemic levels. The company registered mid-single-digit year-over-year growth in sales in Mainland China and more than 35% versus pre-pandemic levels. Sales in North America surged more than 35% versus the prior-year quarter and over 25% compared with pre-pandemic levels.
Margin Discussions
Consolidated gross profit came in at $1,457.4 million, up 24% from the year-ago period. However, gross margin contracted 150 basis points to 68.1%. Management informed that gross margin was adversely impacted by higher freight cost in order to maintain product flow, which totaled 320 basis points.
Further, the company reported adjusted operating income of $476.1 million, up from adjusted operating income of $411.1 million in the prior-year quarter. Meanwhile, adjusted operating margin shrunk 220 basis points to 22.2%.
We note that adjusted SG&A expenses rose 29% year over year to $981.3 million. Again, as a percentage of net sales, SG&A expenses increased to 45.8% from 45.2% in the year-ago period.
Store Update
At the end of the quarter, Tapestry operated 354 Coach stores, 209 Kate Spade outlets and 43 Stuart Weitzman stores in North America. Internationally, the count was 600, 192 and 57 for Coach, Kate Spade and Stuart Weitzman, respectively.
Other Financial Details
Tapestry ended the quarter with cash, cash equivalents and short-term investments of $1,647.7 million, long-term debt of $1,189.1 million and stockholders' equity of $2,927.4 million. The company expects to pay down its July 2022 bonds, totaling $400 million, by the end of the current fiscal year.
Free cash flow year-to-date was an inflow of $596 million. The company incurred capital expenditures of $72 million in the year-to-date period. For fiscal 2022, management anticipates capital expenditures of about $200 million.
Tapestry intends to buyback approximately $1.25 billion worth of shares in fiscal 2022, up from the prior expectation of $1 billion. The company repurchased shares worth $500 million in the second quarter. As of quarter-end, $850 million remained under the current share repurchase authorization.
Shares of this Zacks Rank #2 (Buy) company have increased 4.1% in the past year against the Retail - Apparel And Shoes industry’s decline of 32.1%.
Pick These 3 Stocks Too
Here are three more favorably ranked stocks — DICK'S Sporting Goods (DKS - Free Report) , Capri Holdings (CPRI - Free Report) and Wolverine World Wide (WWW - Free Report) .
DICK'S Sporting Goods, which operates as a sporting goods retailer, sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 104.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for DICK'S Sporting Goods’ current financial year sales and EPS suggests growth of 27.8% and 151.6%, respectively, from the year-ago period. DKS has an expected EPS growth rate of 11.7% for three-five years.
Capri Holdings, a global fashion luxury group, flaunts a Zacks Rank #1. The company’s bottom line has outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters.
The Zacks Consensus Estimate for Capri Holdings’ current financial year sales and EPS suggests growth of 37.1% and 215.8%, respectively, from the year-ago period. CPRI has an expected EPS growth rate of 30.9% for three-five years.
Wolverine World Wide, one of the leading marketers and licensors of a branded casual, active lifestyle, work, outdoor sport, athletic, children's and uniform footwear and apparel, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 18.3%, on average.
The Zacks Consensus Estimate for Wolverine World Wide’s current financial year sales and EPS suggests growth of 34.4% and 125.8%, respectively, from the year-ago period. WWW has an expected EPS growth rate of 10% for three-five years.