Tapestry(TPR) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Total revenue growth of 1% on a constant currency basis, driven by international growth of 6% [5] - Europe sales increased by 14%, Other Asia by 9%, and Japan by 5%, contributing to nearly 20% of Tapestry sales [5] - Greater China sales rose 3%, with declines in the second half due to strong growth in the previous year [5] - North America revenue declined 1%, but profit rose due to gross and operating margin expansion [5] - Record annual gross margin achieved, the highest in over 15 years [8] - EPS grew at a double-digit pace compared to the prior year, reaching $4.29 [27] Business Line Performance - Coach achieved record annual revenue surpassing$5 billion, with significant growth in handbags and AUR gains [7][11] - Kate Spade saw profit growth despite top-line challenges, driven by gross margin expansion and expense management [19] - Stuart Weitzman faced challenges in North America and Greater China but focused on brand-building initiatives [23] - Coach's Tabby family outperformed, with the Tabby Backpack contributing to strong sales [12] - Kate Spade expanded its core handbag offering and saw growth in jewelry, driven by Gen Z and Millennial recruitment [20][21] Market Performance - Europe grew 26%, Other Asia 12%, and Japan 2% in Q4, with Greater China declining 10% as expected [28] - North America sales declined 1% in Q4, but gross and operating margins improved [28] - Digital sales remained strong, representing nearly 30% of revenue, more than 3 times pre-pandemic levels [7] - Coach's global handbag AUR was flat in Q4, impacted by geographic mix, but North America AUR growth remained positive [14] Strategic Direction and Industry Competition - The company is focused on accelerating growth at Kate Spade and Stuart Weitzman while building on Coach's momentum [8] - Two key leadership changes were made: Sandeep Seth as Chief Growth Officer and Eva Erdmann as CEO of Kate Spade [9] - The pending acquisition of Capri is seen as a strategic fit, with plans to reinvigorate Capri's brands [10] - Coach's strategy includes deepening consumer connections, growing leather goods, and expanding lifestyle offerings [18] - Kate Spade's strategy focuses on brand heat, core handbag strengthening, and omnichannel growth [23] Management Commentary on Operating Environment and Future Outlook - The company expects mid-teens growth in Europe and mid-single-digit gains in Other Asia for FY25 [32] - Operating margin expansion of approximately 50 basis points is anticipated for FY25 [33] - EPS for FY25 is projected to be $4.45 to$4.50, representing mid-single-digit growth [34] - Free cash flow for FY25 is expected to be approximately $1.1 billion, with CapEx and cloud computing costs around$190 million [35] - The company remains confident in the long-term potential of China, despite short-term challenges [57][59] Other Important Information - Inventory levels at year-end were 10% below the prior year, with well-controlled and current inventory [31] - The company returned $321 million to shareholders through dividends, a 17$200-$500 price range [78]