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Tapestry Chalks Out More Plans to Lessen Coronavirus Impact
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Luxury lifestyle retailer Tapestry, Inc. (TPR - Free Report) has provided more details on actions to address challenges tied to the coronavirus pandemic. These range from cutting pays, curbing expenses, furloughing associates to assessing the reopening of stores safely. Management also said that it is identifying long-term opportunities by accelerating the company’s multi-year growth agenda.
The company is trying to reopen stores in China as soon as possible, in adherence to governmental regulations. Meanwhile, all of its outlets are open in the Mainland. Moreover, the company focuses on global digital opportunity for all its brands, and ensures that its e-commerce and distribution centers remain operational in key regions. Meanwhile, management has been taking actions to curb expenses in order to stay resilient during such a crisis. It has decided to eliminate non-essential operating expenses and lower fixed costs like rent as well as enhance SG&A savings via right-sizing marketing spend and driving procurement savings. Also, it is cutting down on capex by deferring or cancelling store openings, while prioritizing investments in high-return areas, including digital. Furthermore, it is focused on effectively managing inventories.
Tapestry has also been working toward reducing corporate costs through pay cuts, effective fiscal 2021, for about 12 months. To this end, the company has chosen to cut 50% salary for its chairman and CEO, reduce 50% cash compensation for the board, cancel its Annual Incentive Plan (AIP) for fiscal 2020 with no bonuses being paid in the current fiscal, and eliminate merit salary raises for fiscal 2021. Further, it has decided to reduce pay for North America corporate associates above a threshold by 5-20%, based on the salary level. It also intends to make similar compensation reductions outside North America.
Management had earlier announced plans to suspend shareholder-friendly moves, including repurchases and quarterly cash dividend, beginning fourth-quarter fiscal 2020. It had $600 million remaining under the current share repurchase authorization. Tapestry also drew $700 million from the $900-million revolving credit facility to strengthen liquidity. The company ended fiscal 2019 with roughly $1.2 billion in cash and short-term investments.
Furthermore, Tapestry will continue to support employees by paying salary and benefits for most of its North America retail team through May 30. During this period, it will furlough majority of the assistant store managers and sales associates where stores remain shut. It has also decided to lower retail workforce in North America by roughly 2,100 part-time store associates, effective Apr 25.
Renowned retailers like L Brands , Macy’s (M - Free Report) and Zumiez (ZUMZ - Free Report) have also taken proactive measures to stay financially strong amid the coronavirus crisis.
Wrapping Up
All the aforesaid measures taken by Tapestry will help it create a streamlined organization with an agile operating structure so that the retailer can promptly respond to the fast-evolving backdrop. Meanwhile, the New York-based company’s shares have lost 48.6% compared with the industry’s 42.1% decline over the past three months. Tapestry currently has a Zacks Rank #4 (Sell).
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Tapestry Chalks Out More Plans to Lessen Coronavirus Impact
Luxury lifestyle retailer Tapestry, Inc. (TPR - Free Report) has provided more details on actions to address challenges tied to the coronavirus pandemic. These range from cutting pays, curbing expenses, furloughing associates to assessing the reopening of stores safely. Management also said that it is identifying long-term opportunities by accelerating the company’s multi-year growth agenda.
The company is trying to reopen stores in China as soon as possible, in adherence to governmental regulations. Meanwhile, all of its outlets are open in the Mainland. Moreover, the company focuses on global digital opportunity for all its brands, and ensures that its e-commerce and distribution centers remain operational in key regions. Meanwhile, management has been taking actions to curb expenses in order to stay resilient during such a crisis. It has decided to eliminate non-essential operating expenses and lower fixed costs like rent as well as enhance SG&A savings via right-sizing marketing spend and driving procurement savings. Also, it is cutting down on capex by deferring or cancelling store openings, while prioritizing investments in high-return areas, including digital. Furthermore, it is focused on effectively managing inventories.
Tapestry has also been working toward reducing corporate costs through pay cuts, effective fiscal 2021, for about 12 months. To this end, the company has chosen to cut 50% salary for its chairman and CEO, reduce 50% cash compensation for the board, cancel its Annual Incentive Plan (AIP) for fiscal 2020 with no bonuses being paid in the current fiscal, and eliminate merit salary raises for fiscal 2021. Further, it has decided to reduce pay for North America corporate associates above a threshold by 5-20%, based on the salary level. It also intends to make similar compensation reductions outside North America.
Management had earlier announced plans to suspend shareholder-friendly moves, including repurchases and quarterly cash dividend, beginning fourth-quarter fiscal 2020. It had $600 million remaining under the current share repurchase authorization. Tapestry also drew $700 million from the $900-million revolving credit facility to strengthen liquidity. The company ended fiscal 2019 with roughly $1.2 billion in cash and short-term investments.
Furthermore, Tapestry will continue to support employees by paying salary and benefits for most of its North America retail team through May 30. During this period, it will furlough majority of the assistant store managers and sales associates where stores remain shut. It has also decided to lower retail workforce in North America by roughly 2,100 part-time store associates, effective Apr 25.
Renowned retailers like L Brands , Macy’s (M - Free Report) and Zumiez (ZUMZ - Free Report) have also taken proactive measures to stay financially strong amid the coronavirus crisis.
Wrapping Up
All the aforesaid measures taken by Tapestry will help it create a streamlined organization with an agile operating structure so that the retailer can promptly respond to the fast-evolving backdrop. Meanwhile, the New York-based company’s shares have lost 48.6% compared with the industry’s 42.1% decline over the past three months. Tapestry currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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