As the fashion industry faces economic interruption due to the coronavirus, Tapestry, Inc. is working to free up its cash flow.
The Coach, Kate Spade and Stuart Weitzman parent is drawing down $700 million of its $900 million revolving credit facility to add to its cash balance. It has suspended it share repurchase program and will suspend its quarterly cash dividend beginning in the fourth-quarter of the 2020 fiscal year. The company is also “reviewing every opportunity to eliminate non-essential operating expenses, while reducing capital expenditures and tightly managing inventories.”
“In this period of unprecedented volatility, we are focused on our stakeholders, including our employees and stockholders. We are taking immediate steps to support our employees and local communities. In addition, out of an abundance of caution, we have acted to augment our strong liquidity and reinforce our financial flexibility,” chairman and CEO Jide Zeitlin said in a statement. “We have an 80-year history of successfully navigating external crises. Our three brands are powerful and resonate deeply with consumers globally. This, along with the resilience of our teams, underscores our confidence in the future.”
As the coronavirus pandemic continues to upend normal life in North America and Europe, Tapestry announced today it it would extend store closures through April 10, an additional two weeks from its original date of March 27. It plans to reassess store closings on a biweekly basis. Employees will continue to receive pay and benefits through the next four weeks, the company said.
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Meanwhile, stores across the Coach, Kate Spade and Stuart Weitzman banners have reopened this month across most of Asia and nearly all of China, Tapestry said. Stores are operating with reduced hours in the region.
To assist with medical supply shortages, Tapestry is giving 15,000 masks to hospitals in the U.S., the U.K. and Spain, with additional masks expected to be delivered in April. The company is matching donations of up to $10,000 per North American employee throughout the crisis, and the Coach Foundation is making a contribution to an organization crowdsourced by employees. The Coach and Kate Spade foundations also are seeking opportunities to work with public and private sector entities to assist the most vulnerable, Tapestry said.
Tapestry delivered a second-quarter earnings and sales beat last month, posting adjusted earnings per share of $1.10 compared with analyst estimates of 99 cents, on profits of $298.8 million. Revenues climbed 1% to $1.82 billion, versus consensus bets of $1.81 billion. At the time, the umbrella group said the coronavirus outbreak would dent its second-half results, anticipating sales to drop in the range of $200 million to $250 million. It accordingly adjusted its guidance downward to predict full-year revenues of about $5.9 billion and EPS between $2.15 and $2.25.
Tapestry will provide an update on the operational and financial impacts of the coronavirus outbreak when it reports third-quarter earnings on April 30.
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