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Tapestry - $TPR - Earnings Analysis: Strong performance and growth at Coach brand.

By sagebytes —

Business Model

Tapestry generates revenue primarily through the sale of accessories and lifestyle products through its Coach, Kate Spade, and Stuart Weitzman brands via direct-to-consumer (DTC), wholesale, and licensing businesses.

Revenue Sources

  • Direct-to-Consumer (DTC): Sales through retail stores and e-commerce sites.
  • Wholesale: Sales of products to wholesale customers, including distributors.
  • Licensing: Royalties related to licensing its trademarks.

Revenue Distribution by Channel

  • Sales occur through DTC and Wholesale. The document does not disclose the exact distribution.

Income Statement Analysis

  • Net sales increased by 5.3% year-over-year.
  • Gross profit increased by 9.4% year-over-year, with gross margin expanding to 74.4%.
  • Operating income increased by 10.1% year-over-year, with operating margin at 22.4%.
  • Net income decreased by 3.7% year-over-year.
  • Basic EPS remained flat year-over-year.

Balance Sheet Analysis

  • Total assets decreased significantly due to the repayment of debt related to the terminated Capri acquisition.
  • Total stockholders' equity decreased due to share repurchases and the loss on debt extinguishment.
  • Total liabilities decreased significantly due to the repayment of debt.

Cash Flow Analysis

  • Net cash provided by operating activities decreased, primarily due to changes in operating assets and liabilities
  • Net cash provided by investing activities increased due to proceeds from maturities and sales of investments.
  • Net cash used in financing activities increased significantly due to repayment of debt and share repurchases.
  • Cash and cash equivalents at the end of the period decreased significantly due to debt repayment and share repurchases.

Capital Allocation

The company is focused on returning capital to shareholders through dividends and share repurchases, as evidenced by the accelerated share repurchase program. They also will increase the dividend with earnings to achieve a 35-40% payout.

Management Commentary

Second quarter results outperformed expectations, showcasing our commitment to disciplined brand building.

Increased our outlook for fiscal year twenty twenty five.

Kate Spade revenue trends declined 10%.

Overall Sentiment: Generally positive outlook, with specific focus on momentum at Coach and plans for resetting the Kate Spade brand.

Recommendation

Rating: Hold

Reason for Rating: The company shows strong performance in some areas but also faces challenges. A hold recommendation reflects a neutral stance pending further developments.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/7/2025, 7:21:05 AM