Tapestry(TPR) - 2024 Q3 - Quarterly Report

Financial Performance - In Q3 fiscal 2024, net sales decreased by 1.8% to $1,482.4 million compared to$1,509.5 million in Q3 fiscal 2023[188] - Gross profit increased by 0.8% to $1,107.4 million, with a gross margin of 74.7$204.3 million, with an operating margin of 13.8% compared to 15.0% in Q3 fiscal 2023[188] - Net income fell by 25.3% to $139.4 million, resulting in a diluted earnings per share of$0.60, down from $0.78[188] - Net sales for the third quarter of fiscal 2024 decreased by 1.8$27.1 million to $1.48 billion compared to the same period in fiscal 2023[195] - Coach's net sales increased by 0.1$1.6 million to $1.15 billion, while Kate Spade and Stuart Weitzman saw declines of 5.6$9.1 million to $1.11 billion, with a gross margin of 74.7$22.0 million to $204.3 million, resulting in an operating margin of 13.8$47.3 million to $139.4 million, while excluding items affecting comparability, net income increased by 1.9$190.1 million[209] - Net income per diluted share was $0.60, down from$0.78 in the prior year, but increased to $0.81 when excluding items affecting comparability[210] - The effective tax rate increased to 17.7$55.2 million to 656.7 million in the first nine months of fiscal 2024[232] Expenses and Costs - SG&A expenses rose by 3.6% or 31.1 million to 903.1 million, with SG&A as a percentage of net sales increasing to 60.9%[200] - Corporate expenses included in SG&A increased by 3.2% or 4 million to $128.7 million compared to the same quarter last year[204] - Corporate operating expenses rose by 31.3$39.0 million to 163.7 million in Q3 FY2024, with SG&A expenses as a percentage of net sales increasing by 20 basis points[36] - SG&A expenses increased by 5.7% or 149.8 million to 2.79 billion in the first nine months of FY2024, with SG&A as a percentage of net sales rising to 55.0%[225] - The company incurred total pre-tax charges of 166.6 million related to the Capri Acquisition, impacting operating income and net income significantly[216] - Acquisition costs related to the Capri Acquisition totaled $67.9 million, impacting operating income by$35.0 million and increasing interest expense by $32.9 million[192] Cash Flow and Liquidity - Net cash provided by operating activities increased by$424.8 million to $999.6 million in the first nine months of fiscal 2024[241] - Net cash used in investing activities was$486.1 million, a $526.7 million increase in cash used compared to the prior year[242] - Net cash provided by financing activities was$5.7 billion, a $6.5 billion increase compared to a cash use of$768.7 million in the prior year[245] - Cash and cash equivalents increased by $6.2 billion to$6.98 billion as of March 30, 2024[249] - As of March 30, 2024, total liquidity sources include $3,400.0 million in available credit facilities, with$2,000.0 million from the Revolving Facility and $1,400.0 million from the Capri Acquisition Term Loan Facilities[250] - The company has access to credit facilities and capital markets for various corporate purposes, including acquisition costs and restructuring initiatives[251] - Management believes that cash flows from operations and available financing will support operating, capital, and debt service requirements for fiscal 2024 and beyond[252] Strategic Initiatives - The Capri Acquisition is expected to close in calendar year 2024 for a total enterprise value of approximately$8.5 billion, financed through new senior unsecured notes and term loans[173] - The Company aims to prioritize growth in North America and China while exploring opportunities in under-penetrated markets like Southeast Asia and Europe[177] - The Capri Acquisition is intended to be financed through new senior unsecured notes, new term loans, and cash on hand, with regulatory approval received from all countries except the United States[257] - The company has a voluntary supply chain finance program to improve working capital efficiency, allowing suppliers to sell receivables on a non-recourse basis[254] Market Conditions - The macroeconomic environment remains challenging, with ongoing geopolitical instability and inflationary pressures impacting consumer spending[177] - The company continues to monitor the impact of the Covid-19 pandemic, which has not materially affected business results in the nine months ended March 30, 2024[183] - There have been no significant changes to the company's market risk management strategies as of the latest reporting period[261] Brand Performance - Kate Spade's operating income increased by $2.0 million to$10.0 million in Q3 FY2024, with an operating margin rise of 90 basis points to 3.6% compared to 2.7% in Q3 FY2023[36] - Stuart Weitzman reported an operating loss of $4.7 million in Q3 FY2024, a decrease of$5.5 million, resulting in an operating margin decline of 950 basis points to (8.4)%[36] - Coach's operating income rose by $127.7 million to$1.26 billion, resulting in an operating margin increase of 230 basis points to 32.9%[228] - The fair values of the Kate Spade brand reporting unit exceeded carrying values by approximately 20%, indicating potential risks related to future cash flows and profitability trends[260] - Coach's net sales increased by 3.6% or $131.9 million to$3.84 billion in the first nine months of FY2024, with a 4.7% increase when excluding foreign currency impacts[222] - Kate Spade's net sales decreased by 5.9% or $65.1 million to$1.04 billion in the first nine months of FY2024, primarily due to lower retail sales[222] - Stuart Weitzman's net sales decreased by 12.8% or $28.1 million to$190.9 million in the first nine months of FY2024, with a 11.9% decrease when excluding foreign currency impacts[222] Capital Expenditures - Capital expenditures for the three and nine months ended March 30, 2024, were $29.3 million and$88.4 million, respectively, with an expected total of approximately $140.0 million for fiscal 2024[255] Accounting and Compliance - The company performs annual impairment assessments of goodwill and brand intangibles, with no material changes to critical accounting policies noted as of March 30, 2024[259]