On August 15th, American luxury conglomerate Tapestry, Inc. announced its financial results for the fourth quarter and full fiscal year 2024.
Despite a challenging economic environment, the company achieved results that exceeded analyst expectations. Adjusted earnings per share (EPS) for the fourth quarter were $0.92, surpassing the analysts’ forecast of $0.88. For the full year, reported diluted EPS was $3.50, while non-GAAP diluted EPS reached a record high of $4.29. Notably, the company achieved a 250 basis point expansion in gross margin and generated robust operating and free cash flow exceeding $1.1 billion for the year.
Fourth-quarter revenue was $1.591 billion, a 2% decline compared to the same period last year, but slightly above analysts’ expectations. Despite the revenue decline, gross profit reached $1.19 billion with a gross margin of 74.9%. This margin improvement was driven by operational enhancements, a reduction in freight costs, contributing approximately 90 basis points, and favorable currency exchange rates. Operating income on a reported basis was $235 million, with an operating margin of 14.8%, while non-GAAP operating income was $262 million, with an operating margin of 16.5%.
Among its core brands, Coach achieved full-year sales exceeding $5 billion, marking a 3% year-over-year increase (4% on a constant currency basis). The strong performance in handbag sales, along with an increase in average unit retail price (AUR), significantly contributed to the brand’s improved gross margin.
In contrast, Kate Spade New York recorded a 6% year-over-year sales decline (5% on a constant currency basis) for the full year. The decline was primarily attributed to challenges in the North American market, although digital and global expansion efforts are expected to drive future improvements.
Stuart Weitzman faced a particularly challenging year, with sales declining 14% year-over-year (13% on a constant currency basis) for the full year. However, the brand has made progress in its restructuring efforts, laying a foundation for future growth.
Geographically, North American sales decreased by 1% year-over-year for the full year, but gross margin expansion led to improvements in profitability. Internationally, the company achieved strong growth, with sales increasing 14% in Europe, 9% in other Asia, 5% in Japan, and 3% in China.
Tapestry recorded full-year sales of $6.67 billion, remaining flat compared to the previous year, but up 1% on a constant currency basis. The company’s operations continued to be efficient, contributing to the expansion of gross profit for the full year. Additionally, Tapestry’s robust digital strategy and innovative product lineup expanded its customer base, particularly enhancing brand engagement among younger consumers.
Looking ahead, the company anticipates continued growth in fiscal 2025, expecting further gross margin expansion and approximately $1.1 billion in free cash flow.
Furthermore, the ongoing acquisition of Capri Holdings Limited, which includes Michael Kors, Jimmy Choo, and Versace, is seen as a critical strategic move to strengthen Tapestry’s position as a global brand house.
Earlier this month, Capri Holdings reported its seventh consecutive year of declining annual sales. This situation raised questions about whether Tapestry would reconsider its $8.5 billion acquisition plan for the company.
However, Tapestry affirmed in a statement that it “looks forward to presenting its strong legal arguments in court” and is “working expeditiously to close the transaction in calendar year 2024.”