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Tapestry, Inc. (TPR - Free Report) reported third-quarter fiscal 2023 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. This house of modern luxury accessories and lifestyle brands witnessed year-over-year growth in both net sales and earnings per share. The parent of Coach and Kate Spade brands raised earnings view for the fiscal year on gains from operational efficiency.
We note that shares of Tapestry jumped more than 10.9% during the pre-market session on May 11 on solid earnings results in the third quarter and higher earnings view for fiscal 2023. Shares of this Zacks Rank #4 (Sell) company have gained 8.4% in the past three months against the industry’s 9.7% decline.
Sales & Earnings Picture
Tapestry posted third-quarter earnings of 78 cents a share, which beat the Zacks Consensus Estimate of 59 cents. Also, the metric grew by more than 50% from the year-ago period despite adverse currency translations to the tune of 10 cents a share.
Net sales of this New York-based company came in at $1,509.5 million, beating the Zacks Consensus Estimate of $1,443 million. The metric also inched up 5% on a year-over-year basis on growth across each brand. On a constant-currency basis, the top line increased 9%, excluding an FX headwind of about 370 basis points (bps).
For the third quarter, net sales for Coach came in at $1,144 million, up 7% year over year. Kate Spade’s sales came in at $297.2 million, down 1% from the year-ago period. Net sales for Stuart Weitzman totaled $68.3 million, reflecting growth of 7% year over year.
Sales in North America increased in low-single-digit year over year, driven by higher transactions. The company added nearly 1.2 million new customers in North America.
Tapestry saw 20% sales increases at constant currency in Greater China, Japan and Other Asia, which outpaced expectations. It delivered 4% constant currency revenue growth in Europe. This increase in the metric was driven by higher-than-expected inflection.
The company’s direct-to-consumer revenues increased 10% year over year on a constant-currency basis led by low-teens increase in stores and mid-single-digit gain in digital.
Margin Discussion
The consolidated gross profit came in at $1,098.3 million, up 3.6% from the year-ago period. Also, the gross margin increased 290 bps to 72.8%, gaining from operational efficiency and lower freight expenses. This was somewhat offset by an FX headwind of about 120 bps.
Further, the company reported an operating income of $226 million, up from an operating income of $176 million in the prior-year quarter. Meanwhile, the operating margin came in at 15%, expanding 275 bps from the year-ago period. This increase was driven by disciplined expense management and gross margin gains. However, the metric was partially hurt by an FX headwind of approximately 170 bps.
Store Update
At the end of the quarter, Tapestry operated 330 Coach stores, 206 Kate Spade outlets and 36 Stuart Weitzman stores in North America. Internationally, the count was 604, 193 and 59 for Coach, Kate Spade and Stuart Weitzman, respectively.
Other Financial Details
Tapestry ended the quarter with cash, cash equivalents and short-term investments of $651.8 million, long-term debt of $1,641.6 million and stockholders' equity of $2,263.4 million.
Free cash flow for the third quarter was an inflow of $71 million. The company incurred capital expenditures and implementation costs related to Cloud Computing of $57 million in the aforementioned period.
Tapestry returned $500 million to shareholders through a combination of share repurchases and dividends during the first nine months of fiscal 2023. The company looks to repurchase approximately $700 million worth of shares in fiscal 2023, with $500 million spent in the first nine months to repurchase approximately 13.1 million shares at an average cost of $38.16. The company anticipates a dividend payout of about $300 million, representing a 20% increase from the year-ago figures. Management expects to return about $1 billion to shareholders during fiscal 2023, buoyed by its healthy balance sheet and free cash flow generation.
Outlook
Management raised its earnings view for fiscal 2023 on its operational outperformance in the third quarter. Tapestry now envisions revenues to be roughly $6.7 billion, in line with the prior-year figure. It also reflects nearly 320 bps of FX pressure. On a constant-currency basis, revenues are estimated to grow 3% year over year. Earlier, the company projected revenues of approximately $6.6 billion for fiscal 2023.
The company now guided earnings in the band of $3.85-$3.90, representing low-double-digit growth compared with the prior year on an adjusted basis and includes a currency headwind of approximately 40 cents. Management forecasted earnings between $3.70 and $3.75 per share.
IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 37.2%, on average. Inter Parfums currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial year sales and earnings suggests growth of 15.2% and 7.3%, respectively, from the year-ago reported numbers.
General Mills is a major designer, marketer and distributor of premium lifestyle products. It currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current financial year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported numbers.
Kimberly-Clark is engaged in the manufacture and marketing of a wide range of consumer products around the world. It currently has a Zacks Rank of 2. KMB has a trailing four-quarter earnings surprise of 5.1%, on average.
The Zacks Consensus Estimate for Kimberly-Clark’s current financial year sales and earnings suggests growth of 2.2% and 9.4%, respectively, from the year-ago reported numbers.
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Tapestry (TPR) Q3 Earnings & Revenues Surpass Estimates
Tapestry, Inc. (TPR - Free Report) reported third-quarter fiscal 2023 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. This house of modern luxury accessories and lifestyle brands witnessed year-over-year growth in both net sales and earnings per share. The parent of Coach and Kate Spade brands raised earnings view for the fiscal year on gains from operational efficiency.
We note that shares of Tapestry jumped more than 10.9% during the pre-market session on May 11 on solid earnings results in the third quarter and higher earnings view for fiscal 2023. Shares of this Zacks Rank #4 (Sell) company have gained 8.4% in the past three months against the industry’s 9.7% decline.
Sales & Earnings Picture
Tapestry posted third-quarter earnings of 78 cents a share, which beat the Zacks Consensus Estimate of 59 cents. Also, the metric grew by more than 50% from the year-ago period despite adverse currency translations to the tune of 10 cents a share.
Net sales of this New York-based company came in at $1,509.5 million, beating the Zacks Consensus Estimate of $1,443 million. The metric also inched up 5% on a year-over-year basis on growth across each brand. On a constant-currency basis, the top line increased 9%, excluding an FX headwind of about 370 basis points (bps).
Tapestry, Inc. Price, Consensus and EPS Surprise
Tapestry, Inc. price-consensus-eps-surprise-chart | Tapestry, Inc. Quote
Let’s Delve Deeper
For the third quarter, net sales for Coach came in at $1,144 million, up 7% year over year. Kate Spade’s sales came in at $297.2 million, down 1% from the year-ago period. Net sales for Stuart Weitzman totaled $68.3 million, reflecting growth of 7% year over year.
Sales in North America increased in low-single-digit year over year, driven by higher transactions. The company added nearly 1.2 million new customers in North America.
Tapestry saw 20% sales increases at constant currency in Greater China, Japan and Other Asia, which outpaced expectations. It delivered 4% constant currency revenue growth in Europe. This increase in the metric was driven by higher-than-expected inflection.
The company’s direct-to-consumer revenues increased 10% year over year on a constant-currency basis led by low-teens increase in stores and mid-single-digit gain in digital.
Margin Discussion
The consolidated gross profit came in at $1,098.3 million, up 3.6% from the year-ago period. Also, the gross margin increased 290 bps to 72.8%, gaining from operational efficiency and lower freight expenses. This was somewhat offset by an FX headwind of about 120 bps.
Further, the company reported an operating income of $226 million, up from an operating income of $176 million in the prior-year quarter. Meanwhile, the operating margin came in at 15%, expanding 275 bps from the year-ago period. This increase was driven by disciplined expense management and gross margin gains. However, the metric was partially hurt by an FX headwind of approximately 170 bps.
Store Update
At the end of the quarter, Tapestry operated 330 Coach stores, 206 Kate Spade outlets and 36 Stuart Weitzman stores in North America. Internationally, the count was 604, 193 and 59 for Coach, Kate Spade and Stuart Weitzman, respectively.
Other Financial Details
Tapestry ended the quarter with cash, cash equivalents and short-term investments of $651.8 million, long-term debt of $1,641.6 million and stockholders' equity of $2,263.4 million.
Free cash flow for the third quarter was an inflow of $71 million. The company incurred capital expenditures and implementation costs related to Cloud Computing of $57 million in the aforementioned period.
Tapestry returned $500 million to shareholders through a combination of share repurchases and dividends during the first nine months of fiscal 2023. The company looks to repurchase approximately $700 million worth of shares in fiscal 2023, with $500 million spent in the first nine months to repurchase approximately 13.1 million shares at an average cost of $38.16. The company anticipates a dividend payout of about $300 million, representing a 20% increase from the year-ago figures. Management expects to return about $1 billion to shareholders during fiscal 2023, buoyed by its healthy balance sheet and free cash flow generation.
Outlook
Management raised its earnings view for fiscal 2023 on its operational outperformance in the third quarter. Tapestry now envisions revenues to be roughly $6.7 billion, in line with the prior-year figure. It also reflects nearly 320 bps of FX pressure. On a constant-currency basis, revenues are estimated to grow 3% year over year. Earlier, the company projected revenues of approximately $6.6 billion for fiscal 2023.
The company now guided earnings in the band of $3.85-$3.90, representing low-double-digit growth compared with the prior year on an adjusted basis and includes a currency headwind of approximately 40 cents. Management forecasted earnings between $3.70 and $3.75 per share.
Stocks to Consider
Some top-ranked stocks are Inter Parfums (IPAR - Free Report) , General Mills (GIS - Free Report) and Kimberly-Clark Corporation (KMB - Free Report) .
IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 37.2%, on average. Inter Parfums currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial year sales and earnings suggests growth of 15.2% and 7.3%, respectively, from the year-ago reported numbers.
General Mills is a major designer, marketer and distributor of premium lifestyle products. It currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current financial year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported numbers.
Kimberly-Clark is engaged in the manufacture and marketing of a wide range of consumer products around the world. It currently has a Zacks Rank of 2. KMB has a trailing four-quarter earnings surprise of 5.1%, on average.
The Zacks Consensus Estimate for Kimberly-Clark’s current financial year sales and earnings suggests growth of 2.2% and 9.4%, respectively, from the year-ago reported numbers.