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Tapestry (TPR) Q4 Earnings Top Estimates, Gross Margin Expands
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Tapestry, Inc. (TPR - Free Report) reported fourth-quarter fiscal 2024 results that exceeded the Zacks Consensus Estimate for both revenues and earnings despite a challenging consumer environment. However, both metrics witnessed a year-over-year decline.
Let’s Delve Deeper
Tapestry reported adjusted earnings of 92 cents a share for the fourth quarter, which surpassed the Zacks Consensus Estimate of 88 cents but declined from 95 cents delivered in the prior-year period. Net sales reached $1,591.1 million, beating the consensus estimate of $1,572 million. However, net sales reflected a 2% year-over-year decline.
Throughout fiscal 2024, Tapestry attracted 6.5 million new customers in North America, with more than 50% belonging to Gen Z and millennial demographics. This aligns with the company’s strategic focus on engaging younger consumers, demonstrating the success of its targeted initiatives.
For the quarter, Coach's net sales were $1,250.4 million, flat year over year. Kate Spade’s sales were $290.1 million, marking a 6% decline from the year-ago period, while Stuart Weitzman’s net sales totaled $50.6 million, down 19% year over year.
The Zacks Consensus Estimate for revenues from Coach, Kate Spade and Stuart Weitzman was $1,224.4 million, $292.6 million and $56 million, respectively, for the fiscal fourth quarter.
Sales in North America declined 1% year over year to $1,020.4 million owing to a tough consumer environment. Sales in Greater China dropped 13% to $232.4 million owing to a soft macroeconomic backdrop and a stellar performance in the year-ago period.
In Japan, sales decreased 9% to $127.4 million, while revenues from Other Asian markets rose 9% to $86.2 million. European markets continued to show momentum, with a 26% increase in revenues to $92.3 million, thanks to robust spending from local consumers and tourists.
Margin Discussion
The consolidated gross profit was $1,191.2 million, up 1.6% from the year-ago period. Also, the gross margin increased by 250 basis points to 74.9%, driven by operational enhancements, a 90-basis-point boost from reduced freight expenses and favorable foreign exchange impacts.
The company reported an adjusted operating income of $262 million, down from $273.6 million reported in the year-ago period. Meanwhile, the adjusted operating margin contracted 40 basis points to 16.5%. Adjusted SG&A expenses totaled $929.2 million, up from $899.1 million in the year-ago period. As a percentage of net sales, this metric deleveraged 290 basis points to 58.4%.
Store Update
As of the end of the quarter, Tapestry operated 324 Coach stores, 197 Kate Spade outlets and 34 Stuart Weitzman stores in North America. Internationally, the store count was 606, 181 and 60 for Coach, Kate Spade and Stuart Weitzman, respectively.
Other Financial Details
Tapestry ended the quarter with cash, cash equivalents and short-term investments of $7,203.8 million, long-term debt of $6,937.2 million and stockholders' equity of $2,896.9 million.
Operating cash flow for fiscal 2024 amounted to $1.26 billion, up from $975 million in the previous year. Free cash flow reached $1.15 billion, compared with $791 million in the prior year. The company incurred capital expenditures and implementation costs related to Cloud Computing of $144 million in the fiscal year.
Outlook
Tapestry envisions fiscal 2025 revenues to be around $6.7 billion, indicating growth over the prior year on a reported basis, despite an estimated 50 basis points of currency headwinds. On a constant currency basis, revenues are projected to increase approximately 1%. Operating margin is anticipated to expand by about 50 basis points from the prior year.
Management guided fiscal 2025 earnings between $4.45 and $4.50 per share, indicating mid-single-digit growth from the prior year. This guidance includes a 35 cents negative impact due to the suspension of share repurchases related to the proposed acquisition of Capri Holdings (CPRI - Free Report) as well as an estimated 20 cents currency headwind. Free cash flow is expected to reach approximately $1.1 billion, excluding deal-related costs.
Shares of this Zacks Rank #3 (Hold) company have fallen 10.7% in the past three months compared with the industry’s decline of 6%.
Key Picks
Some better-ranked stocks from the same space are Abercrombie & Fitch Co. (ANF - Free Report) and The Gap, Inc. (GPS - Free Report) .
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year revenues and earnings calls for growth of 11.5% and 51.1%, respectively, from the year-ago reported figures. Abercrombie & Fitch has a trailing four-quarter earnings surprise of 210.3%, on average.
Gap, the largest specialty apparel company in the United States and a house of iconic brands, including Old Navy, Gap, Banana Republic and Athleta, carries a Zacks Rank #2.
The Zacks Consensus Estimate for Gap’s current financial-year revenues and earnings suggests growth of 0.2% and 24.5%, respectively, from the year-ago reported figures. GAP has a trailing four-quarter earnings surprise of 202.7%, on average.
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Tapestry (TPR) Q4 Earnings Top Estimates, Gross Margin Expands
Tapestry, Inc. (TPR - Free Report) reported fourth-quarter fiscal 2024 results that exceeded the Zacks Consensus Estimate for both revenues and earnings despite a challenging consumer environment. However, both metrics witnessed a year-over-year decline.
Let’s Delve Deeper
Tapestry reported adjusted earnings of 92 cents a share for the fourth quarter, which surpassed the Zacks Consensus Estimate of 88 cents but declined from 95 cents delivered in the prior-year period. Net sales reached $1,591.1 million, beating the consensus estimate of $1,572 million. However, net sales reflected a 2% year-over-year decline.
Throughout fiscal 2024, Tapestry attracted 6.5 million new customers in North America, with more than 50% belonging to Gen Z and millennial demographics. This aligns with the company’s strategic focus on engaging younger consumers, demonstrating the success of its targeted initiatives.
For the quarter, Coach's net sales were $1,250.4 million, flat year over year. Kate Spade’s sales were $290.1 million, marking a 6% decline from the year-ago period, while Stuart Weitzman’s net sales totaled $50.6 million, down 19% year over year.
The Zacks Consensus Estimate for revenues from Coach, Kate Spade and Stuart Weitzman was $1,224.4 million, $292.6 million and $56 million, respectively, for the fiscal fourth quarter.
Tapestry, Inc. Price, Consensus and EPS Surprise
Tapestry, Inc. price-consensus-eps-surprise-chart | Tapestry, Inc. Quote
Regional Details
Sales in North America declined 1% year over year to $1,020.4 million owing to a tough consumer environment. Sales in Greater China dropped 13% to $232.4 million owing to a soft macroeconomic backdrop and a stellar performance in the year-ago period.
In Japan, sales decreased 9% to $127.4 million, while revenues from Other Asian markets rose 9% to $86.2 million. European markets continued to show momentum, with a 26% increase in revenues to $92.3 million, thanks to robust spending from local consumers and tourists.
Margin Discussion
The consolidated gross profit was $1,191.2 million, up 1.6% from the year-ago period. Also, the gross margin increased by 250 basis points to 74.9%, driven by operational enhancements, a 90-basis-point boost from reduced freight expenses and favorable foreign exchange impacts.
The company reported an adjusted operating income of $262 million, down from $273.6 million reported in the year-ago period. Meanwhile, the adjusted operating margin contracted 40 basis points to 16.5%. Adjusted SG&A expenses totaled $929.2 million, up from $899.1 million in the year-ago period. As a percentage of net sales, this metric deleveraged 290 basis points to 58.4%.
Store Update
As of the end of the quarter, Tapestry operated 324 Coach stores, 197 Kate Spade outlets and 34 Stuart Weitzman stores in North America. Internationally, the store count was 606, 181 and 60 for Coach, Kate Spade and Stuart Weitzman, respectively.
Other Financial Details
Tapestry ended the quarter with cash, cash equivalents and short-term investments of $7,203.8 million, long-term debt of $6,937.2 million and stockholders' equity of $2,896.9 million.
Operating cash flow for fiscal 2024 amounted to $1.26 billion, up from $975 million in the previous year. Free cash flow reached $1.15 billion, compared with $791 million in the prior year. The company incurred capital expenditures and implementation costs related to Cloud Computing of $144 million in the fiscal year.
Outlook
Tapestry envisions fiscal 2025 revenues to be around $6.7 billion, indicating growth over the prior year on a reported basis, despite an estimated 50 basis points of currency headwinds. On a constant currency basis, revenues are projected to increase approximately 1%. Operating margin is anticipated to expand by about 50 basis points from the prior year.
Management guided fiscal 2025 earnings between $4.45 and $4.50 per share, indicating mid-single-digit growth from the prior year. This guidance includes a 35 cents negative impact due to the suspension of share repurchases related to the proposed acquisition of Capri Holdings (CPRI - Free Report) as well as an estimated 20 cents currency headwind. Free cash flow is expected to reach approximately $1.1 billion, excluding deal-related costs.
Shares of this Zacks Rank #3 (Hold) company have fallen 10.7% in the past three months compared with the industry’s decline of 6%.
Key Picks
Some better-ranked stocks from the same space are Abercrombie & Fitch Co. (ANF - Free Report) and The Gap, Inc. (GPS - Free Report) .
Abercrombie & Fitch is a global, digitally-led, omnichannel specialty retailer of apparel and accessories. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year revenues and earnings calls for growth of 11.5% and 51.1%, respectively, from the year-ago reported figures. Abercrombie & Fitch has a trailing four-quarter earnings surprise of 210.3%, on average.
Gap, the largest specialty apparel company in the United States and a house of iconic brands, including Old Navy, Gap, Banana Republic and Athleta, carries a Zacks Rank #2.
The Zacks Consensus Estimate for Gap’s current financial-year revenues and earnings suggests growth of 0.2% and 24.5%, respectively, from the year-ago reported figures. GAP has a trailing four-quarter earnings surprise of 202.7%, on average.