Tapestry Inc (TPR)

Short-term

Turnover ratios

The activity ratios for Tapestry Inc. reveal insights into the company's operational efficiency and management of receivables, payables, and inventory over the analyzed periods.

Inventory Turnover: The inventory turnover ratio demonstrates fluctuations around an average of approximately 2.0 to 2.5. Notably, there was a peak reaching 2.54 at the end of 2021, indicating periods of more efficient inventory management, with quicker inventory sales relative to stock levels. Conversely, recent periods, especially September 2024 (1.69), show a decline, suggesting a potential slowdown in inventory turnover, possibly due to overstocking or declining sales velocity.

Receivables Turnover: This ratio exhibits significant variability, with pronounced peaks such as 32.52 at the end of 2021 and a high of 31.49 in June 2023. These high values suggest periods of effective collection policies and shorter collections cycles. However, sharp declines are observed, notably to 13.04 in September 2023, indicating increased receivables outstanding or delays in collection processes. The fluctuations between periods point to inconsistent receivables management or varying credit policies.

Payables Turnover: The payables turnover ratio displays mixed trends, generally oscillating between approximately 3.20 and 6.06. Peaks like 6.06 in March 2023 indicate periods where the company paid off its payables more rapidly, possibly reflecting stronger liquidity or strategic payment timing. Lower values, such as 3.20 in September 2024, suggest extended payment cycles, potentially aiming to optimize cash flow.

Working Capital Turnover: This ratio experienced a notable increase from about 0.89–0.94 in late 2023 to a peak of 8.09 in March 2022, indicating periods of efficient utilization of working capital. A significant decline is observed in late 2023 (0.89), implying a reduced effectiveness in deploying working capital or increased working capital levels without a proportionate increase in sales. The later periods show a recovery to levels around 5.0, reflecting adjustments in capital management strategies.

Overall, the activity ratios portray a company with variable operational efficiency. Periods of high receivables turnover coincide with higher inventory turnover, suggesting better overall management of operational assets. Fluctuations in payables and working capital indicators reflect strategic adjustments in supplier payments and resource utilization in response to market and internal factors. These patterns underscore the importance of scrutinizing underlying causes behind shifts, such as changes in credit policies, inventory control, and cash management approaches.

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Average number of days

The activity ratios of Tapestry Inc., specifically Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Days of Payables, exhibit notable temporal fluctuations over the reviewed period from September 2020 to June 2025.

Starting with the Days of Inventory on Hand, the data indicates a trend of significant variability. The ratio peaked at 216.38 days in September 2024, representing the longest inventory holding period within the period analyzed. Prior to this, the inventory days experienced fluctuations, with notable declines such as 143.57 days at the end of 2021, and subsequent increases leading to the 2024 peak. This pattern suggests periods of inventory buildup, potentially linked to inventory accumulation strategies, seasonal changes, or supply chain factors, followed by attempts to liquidate or manage stock levels.

The Days of Sales Outstanding (DSO) remained relatively low and stable during much of the period, notably reaching as low as 11.22 days at the end of 2021 and a minimum of 11.59 days in June 2023, indicating efficient receivables management. However, there are periods of increased DSO, such as 29.64 days in March 2021 and 27.99 days in September 2023, which may suggest slight delays in collection processes or variations in customer payment terms. Overall, the low DSO values reflect a consistent focus on minimizing receivables collection periods.

Regarding the Number of Days of Payables, the ratio demonstrates an upward trend over time, suggesting the company is taking longer to pay its suppliers. The ratio increased from approximately 66.66 days in September 2020 to a peak of 114.19 days in September 2024. This trend implies an extension of payment periods, possibly to optimize working capital or benefit from extended credit terms from suppliers. Nonetheless, the ratio fluctuates, with some periods of reduction, such as 60.26 days in March 2023, which could reflect supplier negotiations or changes in payment policies.

In summary, Tapestry Inc.'s activity ratios reveal a pattern of fluctuating inventory levels with extended inventory days approaching and surpassing three months at certain points, maintaining low receivables collection periods indicative of efficient cash collection, and progressively lengthening payables periods, which may suggest a strategic effort to manage liquidity. These results indicate a company balancing inventory management, credit control, and supplier negotiations to optimize operational efficiency and working capital management over the analyzed timeframe.

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Long-term

The analysis of Tapestry Inc's long-term activity ratios reveals several key trends over the period examined, which span from September 2020 through June 2025, with some data points for future periods.

Fixed Asset Turnover:

The fixed asset turnover ratio indicates the efficiency with which the company utilizes its fixed assets to generate sales. Between September 2020 and March 2021, this ratio exhibits a modest upward trend from 6.34 to 7.19, suggesting an improvement in fixed asset utilization. However, from June 2021 onwards, there is a notable decline in this ratio, dropping sharply to approximately 2.64-2.88 by September and December 2021, indicating a decreased efficiency in utilizing fixed assets during that period. Subsequently, the ratio stabilizes somewhat, fluctuating between 3.42 and 3.71 from December 2021 through September 2022, and then holding steady around 3.43 to 3.52 through March 2023.

From September 2023 onwards, there is a discernible upward trend, with the ratio increasing from 3.52 to 4.01 projected by March 2025. This indicates an improvement in the efficiency of fixed asset utilization, potentially reflecting better asset management or recent strategic initiatives to optimize fixed asset use.

Total Asset Turnover:

The total asset turnover ratio measures overall efficiency in generating sales from total assets. The period from September 2020 to March 2022 shows a gradual increase from 0.59 to a peak of 0.91, indicating improving efficiency in asset utilization. This upward trend continues, reaching around 0.94 to 0.95 through September 2022 and March 2023, reflecting consistent improvement over this period.

However, a sharp decline appears starting in December 2023, with the ratio dropping from approximately 0.93 to 0.49, suggesting a significant decrease in overall asset efficiency, possibly due to increased asset levels without proportional sales growth or some operational challenges. By the next quarter, the ratio recovers to 0.93 and then approaches 1.07 by June 2025, indicating a rebound in asset efficiency.

Summary:

Overall, Tapestry Inc's long-term activity ratios exhibit initial improvements in asset utilization efficiency up to early 2022, with some fluctuations afterward. The fixed asset turnover demonstrates periods of decline followed by a recent upward trend, indicating potential strategic efforts to improve fixed asset utilization. The total asset turnover similarly improved over time but experienced a notable dip toward the end of 2023, followed by recovery, suggesting adjustments in operational performance or asset base management. These ratios collectively reflect periods of operational efficiency enhancement, temporary setbacks, and subsequent recoveries, highlighting the company's evolving asset management and operational strategies over the given period.