Tapestry(TPR) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved record second quarter revenue and earnings per share, with growth outpacing expectations [29][42] - Gross margin expanded by 300 basis points year-over-year, driven by lower freight expenses and operational outperformance [56] - Operating income rose 14% compared to the prior year, with a record second quarter EPS of $1.63, representing a 20% increase [58][62] Business Line Data and Key Metrics Changes - Kate Spade's footwear sales rose double-digits, while jewelry remained a key acquisition vehicle [1] - Coach's leather goods, particularly the Tabby family, nearly doubled sales compared to last year, with strong performance among new and younger consumers [32] - Stuart Weitzman experienced growth in its core boot classification, driven by the SoHo and 5050 families [16] Market Data and Key Metrics Changes - Revenue in Greater China rose 19%, while Japan saw a 6% increase, and Other Asia and Europe grew by 9% and 11% respectively [21][63] - North America revenue was in line with the prior year, reflecting a healthy business model focused on brand health rather than chasing sales [63][101] Company Strategy and Development Direction - The company is focused on strengthening its core bag offerings, enhancing the omni-channel experience, and driving emotional marketing to boost brand relevance [8][12] - There is a commitment to operational excellence and innovation, with plans to introduce new materials and designs in the handbag assortment [11][12] - The acquisition of Capri is expected to drive significant value creation and enhance cash flow, with a focus on disciplined financial operations [86][106] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's positioning and the effectiveness of marketing strategies, particularly in attracting younger consumers [78][97] - The company anticipates continued growth in the fourth quarter, supported by easier comparisons and strong brand positioning [124] - There is an expectation of mid-single-digit sales growth in Greater China and Japan, with a focus on maintaining higher margins [81][82] Other Important Information - The company opened a new multi-brand fulfillment center in Las Vegas to enhance omni-channel capabilities [40] - Free cash flow for the quarter was$ 804 million, with inventory levels 15% below the prior year [64] - A quarterly cash dividend of $0.35 per share was declared, representing a 17% increase compared to last year [66] Q&A Session Summary Question: Can you talk about the strength you're seeing at Coach and your confidence in maintaining momentum? - Management remains excited about the Coach brand's potential and sees strong economic fundamentals supporting the acquisition [89][91] Question: Can you provide insights on the health of the Chinese consumer and what's driving Coach's strength in China? - Management noted strong consumer desire for the brand and high purchase intent in the handbag category, indicating a positive outlook for Coach in China [97][98] Question: What are your thoughts on the outlook for North America handbag and accessories for Coach and Kate Spade? - Management indicated that the North American market is competitive but believes in maintaining healthy growth through innovation and brand messaging [101]