Tapestry, the parent company of Coach, Kate Spade, and Stuart Weitzman, reported its fiscal 2023 fourth-quarter and full-year results on Tuesday, August 17, 2023. The company delivered record earnings per share (EPS) of $0.95 for the quarter and $3.88 for the year, beating analysts’ expectations.
However, the company also forecasted a weak outlook for fiscal 2024, citing soft demand in the US market and supply chain disruptions.
Tapestry’s Q4 and FY 2023 Highlights
Tapestry’s revenue for the fourth quarter was $1.48 billion, flat compared to the same period last year on a reported basis and up 2% in constant currency. The company’s gross margin increased by 350 basis points to 69.2%, driven by higher average unit retail (AUR) and lower promotional activity across all brands. The company’s operating income rose by 21% to $221 million, while its net income increased by 22% to $182 million.
For the full year, Tapestry’s revenue was $5.88 billion, down 1% on a reported basis and up 2% in constant currency. The company’s gross margin expanded by 310 basis points to 68.7%, reflecting AUR growth and improved inventory management. The company’s operating income grew by 13% to $1.01 billion, while its net income rose by 14% to $746 million.
By brand, Coach remained the strongest performer, with revenue increasing by 4% on a reported basis and 7% in constant currency for the quarter, and by 2% on a reported basis and 5% in constant currency for the year. Kate Spade’s revenue declined by 8% on a reported basis and 6% in constant currency for the quarter, and by 7% on a reported basis and 5% in constant currency for the year. Stuart Weitzman’s revenue decreased by 9% on a reported basis and 7% in constant currency for the quarter, and by 11% on a reported basis and 9% in constant currency for the year.
Tapestry’s Challenges and Opportunities in FY 2024
Tapestry’s CEO Joanne Crevoiserat said that the company achieved record EPS in fiscal 2023, reinforcing the power of brand building, consumer-centric strategies, and disciplined execution. She also said that the company advanced its strategic priorities, engaging with consumers around the world through product excellence, unique storytelling, and distinctive omni-channel experiences.
However, she also acknowledged that the company faces some headwinds in fiscal 2024, such as softness in the US market, especially in the outlet channel; supply chain disruptions due to port congestion, labor shortages, and rising costs; and currency fluctuations that could negatively impact its revenue and earnings.
To address these challenges, Crevoiserat said that the company will continue to invest in its brands and business, while maintaining a balanced approach to capital allocation. She also said that the company will leverage its data-rich customer engagement platform, which underpins its growth agenda.
In addition, Crevoiserat announced that Tapestry has entered into a definitive agreement to acquire Capri Holdings Limited, the owner of Michael Kors, Versace, and Jimmy Choo. She said that the acquisition will establish a new powerful global house of luxury and fashion brands that expands its portfolio reach across consumer segments, geographies, and product categories. She also said that the acquisition is expected to be immediately accretive to adjusted earnings and support enhanced cash flow and financial returns.
Tapestry’s Guidance for FY 2024
Tapestry provided its guidance for fiscal 2024 based on current visibility and assumptions. The company expects its revenue to increase by low-single digits on a reported basis and mid-single digits in constant currency. The company expects its EPS to be in the range of $3.90 to $4.00, which includes an estimated negative impact of $0.15 from currency translation.
The company also expects to return approximately $1 billion to shareholders in fiscal 2024 through share repurchases of approximately $700 million and dividend payments of approximately $300 million.