Tapestry(US:TPR)2022-08-18 16:34Financial Data and Key Metrics Changes - Tapestry achieved record annual revenue of $6.7 billion in fiscal year 2022, reflecting a 18% increase compared to the previous year and a 35% increase versus pre-pandemic levels [13][43][60] - Earnings per share (EPS) for the year increased by 20% compared to last year and 35% compared to pre-pandemic levels, reaching $3.80 to $3.90 for fiscal year 2023 [43][56][60] - Free cash flow for the fiscal year was $759 million, with $1.9 billion returned to shareholders, including $1.6 billion in share repurchases [49][50][60] Business Line Data and Key Metrics Changes - Coach brand delivered 18% top line growth in fiscal year 2022, with a 15% increase over fiscal 2019 levels, and achieved a strong operating margin of 30% [17][18] - Kate Spade recorded over $1.4 billion in revenue, representing a 22% growth, while Stuart Weitzman maintained double-digit sales gains for the fiscal year [26][36] - Digital sales reached $2 billion for Tapestry, more than tripling from fiscal 2019 levels, with e-commerce representing nearly 30% of Coach's sales [12][23][33] Market Data and Key Metrics Changes - North America drove strong sales growth, with a 12% increase in the fourth quarter, while Greater China faced a 32% decline due to pandemic-related disruptions [44][45] - Japan saw over 25% sales growth on a constant currency basis, and Europe experienced approximately 65% growth compared to the previous year [46] - Digital channel sales rose high single digits in the quarter, while store and wholesale channels also saw continued growth [46] Company Strategy and Development Direction - Tapestry's strategic growth agenda, named the Acceleration Program, focuses on consumer-centricity, digital leadership, and operational efficiencies to drive brand building and high-return investments [9][10][16] - The company aims to expand customer reach, particularly among younger audiences, while increasing purchase frequency and retention rates across its brands [24][34] - Tapestry is committed to enhancing its digital capabilities and investing in high-growth opportunities in China and other markets [40][54] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to connect with consumers and deliver strong results despite challenging macroeconomic conditions [65] - The outlook for fiscal year 2023 anticipates constant currency revenue growth of 6% to 7%, with a reported revenue growth of 3% to 4% [54][60] - Management acknowledged potential headwinds, including currency fluctuations, ongoing COVID-related disruptions, and inflationary pressures, while emphasizing the strength of their brands and pricing power [53][56] Other Important Information - Tapestry achieved $300 million in run-rate expense savings, which supported growth initiatives and increased brand marketing to 8% of sales [14][15] - The company has made significant progress on corporate responsibility commitments, including partnerships for social justice and sustainability initiatives [15] Q&A Session Summary Question: Confidence in delivering strong year for shareholders - Management highlighted the acquisition of 15 million new customers in North America and record revenue levels, emphasizing the strength of their brands and the success of the Acceleration Program [65] Question: Shape of the year and GSP impact - Management provided insights on expected growth moderation in North America and anticipated improvements in China, with a potential $90 million annual benefit from GSP if passed retroactively [70][74] Question: Health of the store fleet and e-commerce impact - Management expressed confidence in the store fleet's profitability and emphasized the importance of physical stores while also highlighting significant growth in digital sales [76] Question: AUR trends and ticket increases - Management confirmed slight AUR decline in North America for Coach but anticipated a return to AUR growth with planned ticket increases [80] Question: SKU reduction and data analytics in product design - Management explained the use of data analytics to drive SKU reduction and improve product assortment, emphasizing the blend of creativity and analytics in the design process [83][85]