Here's How Tapestry (TPR) is Tackling Coronavirus Concerns
Tapestry, Inc. TPR recently extended store closures in North America and Europe for an additional two weeks through Apr 24. The company has also shuttered majority of its stores in Asia Pacific, including all outlets in Malaysia, Australia, Singapore, New Zealand and in certain prefectures of Japan. Management informed that it will reconsider store closure decisions on a bi-weekly basis, while affected workers will continue to receive pay and benefits during the period.
Management stated that essentially all the company’s stores in China are reopened and their performance is steadily improving. Likewise, Tapestry’s stores in South Korea have returned to normal working hours. In addition, most of its global distribution centers continue to be operational, including one in Malaysia, while its New Jersey’s third-party facility is temporarily shut. Impressively, Tapestry’s e-commerce channels continue to function normally.
The company has taken additional measures to stay afloat during such unprecedented times. Management has planned to put quarterly cash dividend beginning fourth-quarter fiscal 2020 on hold, suspend share repurchase program and curb capital spend. It has also decided to eliminate non-essential operating costs and effectively manage inventories. It has $600 million remaining under the current share repurchase authorization. Tapestry drew $700 million from the $900-million revolving credit facility to reinforce liquidity. The company ended fiscal 2019 with roughly $1.2 billion in cash and short-term investments.
Certainly, apparel and accessories retailers have been facing the brunt of the alarming spread of the pandemic. In addition to Tapestry, renowned players like L Brands LB, Macy’s M and Tilly's TLYS have also taken similar measures. Women’s apparel retailer, L Brands suspended quarterly dividend, cut down capital expenditures and drew $950 million from the revolving credit facility. It also temporarily reduced base compensation by 20% for senior vice presidents, deferred annual merit increases and furloughed the majority of its store associates effective Apr 5, till further notice.
Popular omni-channel retailer, Macy’s has suspended second-quarter fiscal 2020 dividend and lowered capital expenditures for the current fiscal year. The company has also chosen to access the $1.5 billion available under the revolving credit facility. Apparel and accessories dealer, Tilly's has borrowed $23.7 million under its credit facility, shut down the distribution center in Irvine, CA and furloughed most of its associates. It has also recognized additional cost reductions for fiscal 2020.
Price Performance & Zacks Rank
Coming back to Tapestry, the Zacks Rank #4 (Sell) company’s shares have plunged 45.1% in the past three months compared with the industry’s decline of 40.6%.
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