Tapestry, Inc. (TPR) a leading New York-based house of modern luxury accessories and lifestyle brands, recently stated second quarter results for the period ended December 30, 2017.
On December 22, 2017, the U.S. President signed into law “H.R.1”, formerly known as the “Tax Cuts and Jobs Act” (the “Tax Legislation”), which significantly revises the U.S. tax code. The revisions most impactful to the Company are (i) the reduction of the corporate income tax rate from 35% to 21%, and its impact on the current and deferred tax provision and related accounts, most notably the re-measurement of the Company’s deferred tax assets and liabilities, (ii) the implementation of a territorial tax system, (iii) the imposition of a one-time transition tax on deemed repatriated earnings of foreign auxiliaries, and (iv) the introduction of a new tax regime requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations (known as “GILTI”).
The Company anticipates its stated provision for income taxes to enhance in fiscal 2018 primarily driven by the revisions noted above, and in particular, two one-time items. The one-time items are the transition tax on foreign earnings deemed to be repatriated of $315 million, net of the re-measurement benefit of the net deferred tax liabilities of about $102 million, or $213 million in the aggregate. On a non-GAAP basis, not taking into account the one-time items noted, the transition tax and the re-measurement of deferred tax assets and liabilities, the Company estimates that its fiscal year 2018 tax rate will be reduced by about 5% due primarily to the lower U.S. corporate tax rate. This provision excludes any impact associated with GILTI, as GILTI does not affect the Company until fiscal year 2019.
These amounts reflect the Company’s provisional estimate and are subject to adjustment as future guidance becomes accessible, additional facts become known or estimation approaches are refined. Additionally, there are certain provisions of the new legislation that are not applicable to the Company until fiscal 2019, and therefore, any impact associated with these provisions are not comprised of in the Provision for income taxes for the quarter ended December 30, 2017.
Second Quarter 2018 Non-GAAP Reconciliation Items:
The Company recorded the following on a stated basis:
- Tax Legislation: an enhance in provision for income taxes of $194 million as a result of the one-time transition tax on foreign earnings deemed to be repatriated of about $296 million, partially offset by the re-measurement of deferred tax assets and liabilities resulting from the federal rate reduction of about $102 million.
- Integration and Acquisition Costs: pre-tax charges of about $61 million, which primarily relate to the purchase and integration of Kate Spade. These costs comprise of the normal limited life purchase accounting adjustments, costs related to contractual agreements with certain Kate Spade executives, severance as a result of integration and professional fees.
- Operational Efficiency Plan: pre-tax charges of about $4 million, primarily related to technology infrastructure costs.
During the second quarter of 2018, these items reduced the Company’s stated net income by $243 million or about $0.85 per diluted share in the second quarter.
Overview of Second Quarter 2018 Tapestry, Inc. Results:
Fiscal 2018 second quarter performance comprises the contribution of Kate Spade, which the Company attained on July 11, 2017 and therefore is not comprised of in the preceding year results.
- Net sales totaled $1.79 billion for the second fiscal quarter as contrast to $1.32 billion in the preceding year, an enhance of 35% on both a stated and constant currency basis.
- Gross profit totaled $1.18 billion on a stated basis, while gross margin for the quarter was 66.0% on a stated basis contrast to 68.6% in the preceding year. On a non-GAAP basis, gross profit totaled $1.20 billion, while gross margin was 67.0% as contrast to 68.6% in the preceding year.
- SG&A expenses totaled $831 million on a stated basis and represented 46.6% of sales contrast to 47.6% in the year-ago quarter. On a non-GAAP basis, SG&A expenses were $785 million and represented 44.0% of sales as contrast to 46.3% in the year-ago period.
- Operating income for the quarter was $346 million on a stated basis, while operating margin was 19.4% as compared to 21.0% in the preceding year. On a non-GAAP basis, operating income was $411 million, an enhance of 40% as compared to preceding year, while operating margin was 23.0% as compared to 22.3% in last year’s second quarter.
- Net interest expense was $22 million in the quarter as contrast to $5 million in the year ago period.
- Net income for the quarter was $63 million on a stated basis, with earnings per diluted share of $0.22. This contrast to stated net income of $200 million with earnings per diluted share of $0.71 in the preceding year period. On a non-GAAP basis, net income for the quarter totaled $306 million, with earnings per diluted share of $1.07. This contrast to non-GAAP net income of $211 million with earnings per diluted share of $0.75 in the preceding year period. The tax rate for the quarter was 80.5% and 21.3% on a stated and non-GAAP basis, respectively, reflective of the impact of the tax legislation changes, as noted. This contrast to a tax rate of 26.6% and 27.0% in the preceding year on a stated and non-GAAP basis, respectively.
Technical Alerts about TPR
Tapestry, Inc. (NYSE:TPR) posted a 7.36% after which it closed the day’ session at $48.28 and sees an average of 2.73M shares trade hands in each session while it’s while its relative trading volume is 3.09.
The profounder technical indicators have offered up some solid data for traders.
According to Tapestry, Inc.’s Insider ownership is at 0.30%. The total amount of shares outstanding is 290.56M, giving the company a market capitalization of about 13.07B. The stock has seen its SMA50 which is now 8.72%. In looking the SMA 200 we see that the stock has seen a 10.57%.The Company’s net profit margin for the 12 months at 9.60%. Comparatively, the gazes have a Gross margin 66.10%.
Institutions own 91.10% of Tapestry, Inc. (TPR)’s shares.
Valuations and Returns for Tapestry, Inc. (NYSE:TPR)
The ratios of the return on assets (ROA) and the return on owner’s equity (ROE) are the most used profitability ratios in the analysis while ROI deals with the invested cash in the company and the return the investor realize on that money based on the net profit of the business.
Activity ratios are another group of ratios; it’s usually used to measure the ability to optimize the use of the available resources. These ratios are other measures of operational efficiency and performance. Among this group of ratios is the turnover to capital employed or return on investment (ROI) ratio.
ROE (Return on equity) was recorded as 15.70% and TPR’s has Return on assets (ROA) of 8.10% while Return on Investment (ROI) was recorded as 13.50%.
Analysts have a mean recommendation of 2.20 on this stock (A rating of less than 2 means buy, “hold” within the 3 range, “sell” within the 4 range, and “strong sell” within the 5 range). The company maintains price to book ratio of 4.33. A P/B ratio of less than 1.0 can indicate that a stock is undervalued, while a ratio of greater than 1.0 may indicate that a stock is overvalued.