Tapestry(US:TPR)2021-08-19 17:15Financial Data and Key Metrics Changes - Tapestry delivered record operating income and operating margin in FY21, with total sales rising 126% year-over-year in Q4, surpassing pre-pandemic levels [49][56] - Generated $1.2 billion in free cash flow and ended the year with approximately $2 billion in cash, while reducing total borrowings to $1.6 billion [58][60] - Achieved earnings per diluted share of $0.74 on a 14-week basis, significantly up from a loss in the prior year and 7% ahead of pre-pandemic EPS levels [56] Business Line Data and Key Metrics Changes - Coach, the largest brand, saw revenue rise 117% year-over-year in Q4, with operating income increasing by 67% compared to the previous year [17][18] - Kate Spade experienced a 95% increase in sales in Q4 compared to the prior year, although still 4% below FY19 levels [27] - Stuart Weitzman reported over 35% revenue growth in Mainland China compared to the prior year, indicating strong demand recovery [40] Market Data and Key Metrics Changes - North America led overall growth with a 150% increase versus FY20 and a high single-digit percentage increase compared to FY19 [50] - Greater China sales reached $1.1 billion, with over 60% growth on the Mainland [10] - Digital sales grew more than 35% year-over-year, reaching 30% penetration, which is three times the levels seen in 2019 [52] Company Strategy and Development Direction - The company is focused on enhancing digital capabilities and expanding its presence in China, with plans to return over $750 million to shareholders through dividends and share repurchases in FY22 [15][60] - Tapestry aims to increase market share in core categories and expand lifestyle offerings, targeting over $1 billion in revenue from these initiatives [25][26] - The acceleration program has transformed the organization, allowing for better customer engagement and operational efficiency [6][80] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong consumer demand and momentum entering FY22, expecting revenue to increase at a mid-teens rate, reaching approximately $6.4 billion [68][88] - The company is prepared to mitigate supply chain disruptions by securing expedited deliveries and increasing average unit retail (AUR) prices [67][69] - Management highlighted the importance of investing in long-term growth drivers, including marketing and digital capabilities, to sustain momentum [89][91] Other Important Information - The company reduced SKU counts by 40% to 45%, optimizing inventory and enhancing gross margins [12][54] - Tapestry closed a net of 59 locations globally in FY21, focusing on profitability and optimizing its global fleet [57] - The company plans to invest approximately $220 million in capital expenditures, primarily for store development in China and digital initiatives [75][76] Q&A Session Summary Question: What signs give confidence in the strong trajectory planned for FY22? - Management cited standout results in FY21, record operating income, and momentum building as indicators of confidence [87][88] Question: Can you quantify the retroactive GSP benefit for gross margin expectations? - The GSP benefit is expected to contribute about 50 basis points to the margin [98] Question: How do you see the potential for Kate Spade's margin profile evolving over time? - Management sees a path for Kate Spade to achieve high teens margin opportunities, with significant growth potential [116] Question: What are the priorities for the Coach brand as a lifestyle brand? - The focus will be on expanding into men's products and enhancing footwear offerings, alongside maintaining strong AUR growth [140] Question: How will the company retain newly acquired customers? - Retaining new customers will involve consistent innovation and engagement through data insights and social media presence [142]