Tapestry Inc (NYSE:TPR) has reported record second-quarter earnings and raised its outlook for full-year 2023 after it outperformed expectations in the holiday season, sending its shares higher in early New York trade.
The parent company of Coach, Kate Spade, and Stuart Weitzman said net sales for the three months ended December 31, 2022, decreased by 5% to $2.03 billion. Excluding the impact of the stronger dollar, it said revenue declined about 2% from a year earlier.
Gross profit amounted to $1.39 billion as its gross margins improved to 68.6%, benefitting from a lower freight expense. Net income rose 3.8% to $330 million, with diluted earnings per share (EPS) of $1.36, up from $1.15 in 2Q 2022.
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“During the key holiday season – where brand magic, compelling product and operational excellence are required to win with consumers – we outperformed expectations,” Tapestry CEO Joanne Crevoiserat said in a statement. “To this end, we delivered record second-quarter earnings despite a challenging backdrop. This is a direct reflection of our talented teams and the benefits of our globally diversified business model, which continue to fuel innovation and customer engagement across our portfolio.”
For the full year, Tapestry said it expects revenue of about $6.6 billion, a slight decrease from 2022 due to the impact of the stronger dollar. On a constant currency basis, it expects revenue to be 2% to 3% higher. It is guiding for diluted EPS of $3.70 to $3.75, reflecting high single-digit growth and above its previous outlook.
The company said it expects to return approximately $1 billion to shareholders in fiscal 2023 given its strong balance sheet, free cash flow generation and growth outlook. This includes share repurchases of about $700 million and an annual dividend of $1.20 per share totaling approximately $300 million, representing a 20% increase.
“Moving forward, we will continue to power our iconic brands to move at the speed of the consumer,” Crevoiserat said.“We are staying agile amid an uncertain environment by leaning into Tapestry’s core strengths: purpose-led brands with emotional customer connections amplified by our digitally enabled, direct-to-consumer platform. Our focus is clear, and we are confident in our ability to drive sustainable growth and deliver meaningful value for all stakeholders.”
Tapestry’s shares were more than 5% higher at $45 by 10am Eastern Time.
Contact the author at stephen.gunnion@proactiveinvestors.com