Tapestry (NYSE: TPR) reported Q3 EPS of ($0.27), $0.16 worse than the analyst estimate of ($0.11). Revenue for the quarter came in at $1.07 billion versus the consensus estimate of $1.03 billion.

Overview of Third Quarter 2020 Tapestry, Inc. Results

The following results include the impact of the coronavirus. Please note the Company is not providing comparable store sales figures, as the Company believes this will not be a valuable measure given the current business environment and number of store closures during the quarter.

• Net sales totaled $1.07 billion for the fiscal third quarter as compared to $1.33 billion in the prior year.
• Gross profit totaled $616 million on a reported basis, while gross margin for the quarter was 57.4% compared to $916 million and 68.8%, respectively, in the prior year. On a non-GAAP basis, gross profit totaled $720 million, while gross margin was 67.1% as compared to $921 million and 69.2%, respectively, in the prior year.
• SG&A expenses totaled $1.30 billion on a reported basis and represented 121.3% of sales compared to $806 million and 60.6%, respectively, in the year ago quarter. On a non-GAAP basis, SG&A expenses were $752 million and represented 70.1% of sales as compared to $776 million and 58.3%, respectively, in the year ago period.
• Operating loss was approximately $685 million on a reported basis, while operating margin was (63.9)% versus operating income of $110 million and an operating margin of 8.2% in the prior year. On a non-GAAP basis, operating loss was $32 million, while operating margin was (2.9)% versus operating income of $145 million and an operating margin of 10.9% in the prior year.
• Net interest expense was approximately $13 million in the quarter as compared to $11 million in the year ago period.
• Other expense was $6 million versus $4 million in the prior year.
• Net loss for the quarter was $677 million on a reported basis, with earnings per diluted share of ($2.45). This compared to net income of $117 million with earnings per diluted share of $0.40 in the prior year period. The reported tax rate for the quarter of 4.0% compared to the prior year reported rate of (23.4)%. On a non-GAAP basis, net loss for the quarter was $76 million with earnings per diluted share of ($0.27). This compared to non-GAAP net income of $122 million with earnings per diluted share of $0.42 in the prior year period. The non-GAAP tax rate for the quarter was (48.2)% compared to 6.8% in the prior year.
• Inventory was $853 million at the end of quarter versus ending inventory of $811 million in the year ago period.

Jide Zeitlin, Chairmn and Chief Executive Officer of Tapestry, Inc., said, “We entered the calendar year with strong underlying momentum. As the novel coronavirus expanded across the globe, our results materially weakened. In navigating this unprecedented crisis, we are guided by our values and have continued to prioritize our community – our people, their families, and our customers. I am incredibly proud of our teams around the world and the resilience they have shown in facing events that have impacted every aspect of how we live our lives and manage our business.”

“No one is immune to the effects of this one hundred year storm. We are taking aggressive actions to assure that Tapestry emerges a strong company when conditions normalize. We have powerful brands with deep consumer connections and a long history of successfully navigating global challenges and macroeconomic shocks. In addition, we have a strong balance sheet, we benefit from a multi-channel international distribution model with only modest exposure to wholesale, and a diversified supply chain.”

“We are building on our strengths and moving swiftly to adapt to the current environment with a focus on preserving liquidity and enhancing financial flexibility. We are accelerating key elements of the transformational work we began prior to the crisis, notably driving outsized growth in digital and creating a more streamlined and data-driven organization.”

Outlook

“The impact of the Covid-19 pandemic transcends near-term results. Consumer behaviors are changing and secular trends are accelerating. In this environment, we are planning conservatively while acting decisively to transform the way we operate and engage with our customers. The saliency of our brands plus the strong financial position of our company will enable us to successfully manage through this crisis, as we become a more consumer-centric, data-driven, and agile organization," Mr. Zeitlin concluded.

For earnings history and earnings-related data on Tapestry (TPR) click here.