Tapestry (NYSE: TPR) reported Q2 EPS of $1.15, $0.14 better than the analyst estimate of $1.01. Revenue for the quarter came in at $1.69 billion versus the consensus estimate of $1.63 billion.

Overview of Second Quarter 2021 Tapestry, Inc. Results

• Net sales totaled $1.69 billion for the second quarter as compared to $1.82 billion in the prior year, representing a 7% decline.
• Gross profit totaled $1.17 billion, while gross margin was 69.6% on both a reported and non-GAAP basis. This compared to prior year gross profit of approximately $1.21 billion on a reported and non-GAAP basis and gross margin of 66.6% and 66.7% on a reported and non-GAAP basis, respectively.
• SG&A expenses totaled $784 million on a reported basis and represented 46.5% of sales compared to $847 million and 46.6%, respectively, in the year ago quarter. On a non-GAAP basis, SG&A expenses were $763 million and represented 45.2% of sales as compared to $838 million and 46.1%, respectively, in the year ago period.
• Operating income was $389 million on a reported basis, while operating margin was 23.1% versus operating income of $363 million and an operating margin of 20.0% in the prior year. On a non-GAAP basis, operating income was $411 million, while operating margin was 24.4% versus operating income of $373 million and an operating margin of 20.6% in the prior year.
• Net interest expense was $19 million in the quarter as compared to $14 million in the year ago period.
• Other income was $4 million versus $6 million in the prior year.
• Net income for the quarter was $311 million on a reported basis, with earnings per diluted share of $1.11. This compared to net income of $299 million with earnings per diluted share of $1.08 in the prior year period. The reported tax rate for the quarter was 16.9% compared to 15.8% in the prior year period. On a non-GAAP basis, net income for the quarter was $323 million with earnings per diluted share of $1.15. This compared to non-GAAP net income of $304 million with earnings per diluted share of $1.10 in the prior year period. The non-GAAP tax rate for the quarter was 18.5% compared to 16.9% in the prior year.
• Inventory was $632 million at the end of quarter versus ending inventory of $748 million in the year ago period.

Joanne Crevoiserat, Chief Executive Officer of Tapestry, Inc., said, “Our results significantly outpaced expectations driven by the successful execution of our Acceleration Program. Our sharpened focus on the consumer fueled new customer acquisition across all brands with notable sales gains in Digital and China. Importantly, for the second consecutive quarter, we generated strong operating income growth supported by a reduction in promotional activity and higher AUR, as well as disciplined inventory and expense management. Further, we delivered this profit growth in the face of unprecedented Covid-related external headwinds, including pressured bricks and mortar traffic, store closures and capacity limits, as well as higher freight costs and shipping constraints. I’m incredibly proud of our teams around the world for their unwavering passion, agility, and resilience this holiday season.”

“As we enter the second half of our fiscal year, we are optimistic for the future in spite of the uncertain backdrop. We are listening closely to consumers and responding in real-time to changes in their values, shopping behaviors, and brand engagement. We are leaning into the competitive advantages of our platform, bringing innovation to both product and how we connect with customers. As a result, we are driving demand for our categories and stretching what’s possible for our brands. Looking forward, I am confident that Tapestry will emerge from the pandemic stronger, well-positioned to both capture market share at higher levels of profitability and fully unlock the flywheel of sustainable, long-term growth,” Ms. Crevoiserat concluded.

Fiscal Year 2021 Outlook

Due to the dynamic nature of the Covid-19 crisis and lack of visibility, the Company is not providing detailed guidance for fiscal 2021. However, given Tapestry’s better-than-anticipated results in the fiscal first half, and assuming a continued recovery emerging from the pandemic, the Company now expects revenue for the fiscal year to increase at a high-single digit rate on a 52-week basis and in the area of 10% on 53-week basis. This outlook continues to include the expectation for a topline inflection and strong bottom line growth during the second half of the fiscal year.

The Company also notes that fiscal 2021 includes a 53rd week in its fourth fiscal quarter.

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