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Tapestry's (TPR) Q4 Earnings Meet Estimates, Revenues Miss
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Tapestry, Inc. (TPR - Free Report) came up with fourth-quarter fiscal 2022 results, wherein the top line missed the Zacks Consensus Estimate while the bottom line met the same. Both net sales and earnings per share improved year over year. This house of modern luxury accessories and lifestyle brands witnessed double-digit sales growth on a 13-week comparable basis across North America, Japan, Other Asia and Europe. This helped offset a low-30% sales decline in Greater China owing to pandemic-induced disruptions.
Sales & Earnings Picture
Tapestry posted fourth-quarter adjusted earnings of 78 cents a share that came in line with the consensus mark and increased from 74 cents reported in the year-ago period. On a 13-week comparable basis, adjusted earnings per share jumped 20% year over year.
Net sales of this New York-based company came in at $1,624.9 million, missing the Zacks Consensus Estimate of $1,644 million. However, the metric rose 1% on a year-over-year basis, driven by growth across the Coach and Kate Spade brands. On a 13-week comparable basis, net sales improved 7% from the year-ago period.
Management notified that the extra week in fiscal 2021 had contributed $93 million to Tapestry’s top line and 9 cents a share to the bottom line.
Let’s Take an Insight
For the fourth quarter, net sales for Coach came in at $1,209 million, up 2% year over year. Kate Spade sales came in at $344.1 million, up 1% from the year-ago period. Net sales for Stuart Weitzman totaled $71.8 million, reflecting a decline of 15% year over year.
Strength in North America as well as sustained growth in the digital channel contributed to Tapestry’s results. Notably, the company added nearly 1.8 million new customers across channels in North America. Global digital sales increased in high-single digits, and represented roughly 30% of total revenues.
On a 13-week comparable basis, sales in North America and Europe rose 12% and 65% year over year, respectively. Sales in Japan grew more than 25%. However, sales at Greater China declined 32% from the last year.
Consolidated gross profit came in at $1,119.2 million, down 3% from the year-ago period. Moreover, gross margin contracted 280 basis points to 68.9%. Management informed that gross margin was adversely impacted by higher freight cost, which totaled $36 million or 215 basis points.
Further, the company reported an adjusted operating income of $259.6 million, down from an adjusted operating income of $272.5 million in the prior-year quarter. Meanwhile, the adjusted operating margin shrunk 90 basis points to 16%. However, the figure was slightly up from the adjusted operating margin of 15.9% reported in the prior year, on a 13-week comparable basis.
Store Update
At the end of the quarter, Tapestry operated 343 Coach stores, 207 Kate Spade outlets and 39 Stuart Weitzman stores in North America. Internationally, the count was 602, 191 and 61 for Coach, Kate Spade and Stuart Weitzman, respectively.
Other Financial Details
Tapestry ended the quarter with cash, cash equivalents and short-term investments of $953.2 million, long-term debt of $1,659.2 million and stockholders' equity of $2,285.5 million.
Free cash flow for fiscal 2022 was an inflow of $759 million. The company incurred capital expenditures and implementation costs related to Cloud Computing of $162 million in the fiscal year. For fiscal 2023, management anticipates capital expenditures and implementation costs related to Cloud Computing of about $325 million.
Tapestry looks to repurchase approximately $700 million worth of shares in fiscal 2023, under its existing $1.5 billion share repurchase authorization. Meanwhile, the company’s board approved a 20% hike in the quarterly dividend of 30 cents a share. The dividend will be paid out on Sep 26, 2022 to shareholders of record as of the close of business on Sep 9.
In fiscal 2022, Tapestry repurchased $1.6 billion worth of shares or approximately 42 million shares at an average cost of $38.08 per share. This included the buyback of $350 million worth of shares in the fourth quarter or approximately 11 million shares at an average cost of $32.77 per share.
Outlook
Tapestry envisions revenues to be approximately $6.9 billion for fiscal 2023. This suggests an increase of 3-4% on a reported basis, which includes roughly 300 basis points of FX pressure. On a constant currency basis, revenue growth is projected to be approximately 6-7%.
The company guided earnings in the band of $3.80 to $3.90 per share. The current projection suggests a sharp increase from adjusted earnings of $3.47 per share reported in fiscal 2022.
Management foresees fiscal 2023 gross margin as relatively in line with fiscal 2022. Tapestry had reported a gross margin of 69.6% in fiscal 2022. It expects the fiscal 2023 operating margin to shrink in the area of 50 basis points year over year owing to FX headwinds of about 100 basis points.
Shares of this Zacks Rank #3 (Hold) company have advanced 19.9% in the past three months compared with the industry’s rise of 10.8%.
The Zacks Consensus Estimate for Dollar General’s current financial-year revenues and EPS suggests growth of 10% and 13.4%, respectively, from the year-ago reported figure. Dollar General has a trailing four-quarter earnings surprise of 2.8%, on average.
Costco, which is engaged in the operation of membership warehouses, carries a Zacks Rank #2. COST has an expected EPS growth rate of 9.2% for three to five years.
The Zacks Consensus Estimate for Costco’s current financial-year sales and EPS suggests growth of 15.4% and 18.2%, respectively, from the year-ago period. COST has a trailing four-quarter earnings surprise of 9.7%, on average.
Dollar Tree operates discount variety retail stores. The stock currently carries a Zacks Rank #2. DLTR has an expected EPS growth rate of 15.5% for three to five years.
The Zacks Consensus Estimate for Dollar Tree’s current financial-year revenues and EPS suggests growth of 6.7% and 40.7%, respectively, from the year-ago reported figure. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average.
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Tapestry's (TPR) Q4 Earnings Meet Estimates, Revenues Miss
Tapestry, Inc. (TPR - Free Report) came up with fourth-quarter fiscal 2022 results, wherein the top line missed the Zacks Consensus Estimate while the bottom line met the same. Both net sales and earnings per share improved year over year. This house of modern luxury accessories and lifestyle brands witnessed double-digit sales growth on a 13-week comparable basis across North America, Japan, Other Asia and Europe. This helped offset a low-30% sales decline in Greater China owing to pandemic-induced disruptions.
Sales & Earnings Picture
Tapestry posted fourth-quarter adjusted earnings of 78 cents a share that came in line with the consensus mark and increased from 74 cents reported in the year-ago period. On a 13-week comparable basis, adjusted earnings per share jumped 20% year over year.
Net sales of this New York-based company came in at $1,624.9 million, missing the Zacks Consensus Estimate of $1,644 million. However, the metric rose 1% on a year-over-year basis, driven by growth across the Coach and Kate Spade brands. On a 13-week comparable basis, net sales improved 7% from the year-ago period.
Management notified that the extra week in fiscal 2021 had contributed $93 million to Tapestry’s top line and 9 cents a share to the bottom line.
Let’s Take an Insight
For the fourth quarter, net sales for Coach came in at $1,209 million, up 2% year over year. Kate Spade sales came in at $344.1 million, up 1% from the year-ago period. Net sales for Stuart Weitzman totaled $71.8 million, reflecting a decline of 15% year over year.
Strength in North America as well as sustained growth in the digital channel contributed to Tapestry’s results. Notably, the company added nearly 1.8 million new customers across channels in North America. Global digital sales increased in high-single digits, and represented roughly 30% of total revenues.
On a 13-week comparable basis, sales in North America and Europe rose 12% and 65% year over year, respectively. Sales in Japan grew more than 25%. However, sales at Greater China declined 32% from the last year.
Tapestry, Inc. Price, Consensus and EPS Surprise
Tapestry, Inc. price-consensus-eps-surprise-chart | Tapestry, Inc. Quote
Margin Discussions
Consolidated gross profit came in at $1,119.2 million, down 3% from the year-ago period. Moreover, gross margin contracted 280 basis points to 68.9%. Management informed that gross margin was adversely impacted by higher freight cost, which totaled $36 million or 215 basis points.
Further, the company reported an adjusted operating income of $259.6 million, down from an adjusted operating income of $272.5 million in the prior-year quarter. Meanwhile, the adjusted operating margin shrunk 90 basis points to 16%. However, the figure was slightly up from the adjusted operating margin of 15.9% reported in the prior year, on a 13-week comparable basis.
Store Update
At the end of the quarter, Tapestry operated 343 Coach stores, 207 Kate Spade outlets and 39 Stuart Weitzman stores in North America. Internationally, the count was 602, 191 and 61 for Coach, Kate Spade and Stuart Weitzman, respectively.
Other Financial Details
Tapestry ended the quarter with cash, cash equivalents and short-term investments of $953.2 million, long-term debt of $1,659.2 million and stockholders' equity of $2,285.5 million.
Free cash flow for fiscal 2022 was an inflow of $759 million. The company incurred capital expenditures and implementation costs related to Cloud Computing of $162 million in the fiscal year. For fiscal 2023, management anticipates capital expenditures and implementation costs related to Cloud Computing of about $325 million.
Tapestry looks to repurchase approximately $700 million worth of shares in fiscal 2023, under its existing $1.5 billion share repurchase authorization. Meanwhile, the company’s board approved a 20% hike in the quarterly dividend of 30 cents a share. The dividend will be paid out on Sep 26, 2022 to shareholders of record as of the close of business on Sep 9.
In fiscal 2022, Tapestry repurchased $1.6 billion worth of shares or approximately 42 million shares at an average cost of $38.08 per share. This included the buyback of $350 million worth of shares in the fourth quarter or approximately 11 million shares at an average cost of $32.77 per share.
Outlook
Tapestry envisions revenues to be approximately $6.9 billion for fiscal 2023. This suggests an increase of 3-4% on a reported basis, which includes roughly 300 basis points of FX pressure. On a constant currency basis, revenue growth is projected to be approximately 6-7%.
The company guided earnings in the band of $3.80 to $3.90 per share. The current projection suggests a sharp increase from adjusted earnings of $3.47 per share reported in fiscal 2022.
Management foresees fiscal 2023 gross margin as relatively in line with fiscal 2022. Tapestry had reported a gross margin of 69.6% in fiscal 2022. It expects the fiscal 2023 operating margin to shrink in the area of 50 basis points year over year owing to FX headwinds of about 100 basis points.
Shares of this Zacks Rank #3 (Hold) company have advanced 19.9% in the past three months compared with the industry’s rise of 10.8%.
3 Stocks Hogging the Limelight
Here we have highlighted three better-ranked stocks, namely Dollar General (DG - Free Report) , Costco (COST - Free Report) and Dollar Tree (DLTR - Free Report) .
Dollar General, a discount retailer, currently carries a Zacks Rank #2 (Buy). DG has an expected EPS growth rate of 12.8% for three to five years. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Dollar General’s current financial-year revenues and EPS suggests growth of 10% and 13.4%, respectively, from the year-ago reported figure. Dollar General has a trailing four-quarter earnings surprise of 2.8%, on average.
Costco, which is engaged in the operation of membership warehouses, carries a Zacks Rank #2. COST has an expected EPS growth rate of 9.2% for three to five years.
The Zacks Consensus Estimate for Costco’s current financial-year sales and EPS suggests growth of 15.4% and 18.2%, respectively, from the year-ago period. COST has a trailing four-quarter earnings surprise of 9.7%, on average.
Dollar Tree operates discount variety retail stores. The stock currently carries a Zacks Rank #2. DLTR has an expected EPS growth rate of 15.5% for three to five years.
The Zacks Consensus Estimate for Dollar Tree’s current financial-year revenues and EPS suggests growth of 6.7% and 40.7%, respectively, from the year-ago reported figure. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average.