Tapestry Inc (TPR)

The liquidity ratios of Tapestry Inc. over the period from June 30, 2021, to June 30, 2025, indicate notable fluctuations with a significant increase observed in 2024.

The current ratio, which measures the company's ability to meet its short-term liabilities with its short-term assets, exhibits a decline from 2.37 in 2021 to 1.75 in 2022, followed by a slight recovery to 1.84 in 2023. A sharp escalation occurs in 2024, rising dramatically to 5.14, before decreasing again to 1.87 in 2025. This pattern suggests a temporary strengthening of liquidity in 2024, possibly attributable to a substantial increase in current assets or a reduction in current liabilities, though the ratio normalizes by 2025.

The quick ratio, which excludes inventory from current assets to assess the company's immediate liquidity, shows a similar trend. It declines from 1.56 in 2021 to 0.82 in 2022, and further to 0.74 in 2023, indicating reduced ability to cover short-term liabilities without relying on inventory. A substantial increase is apparent in 2024, reaching 4.48, highlighting an exceptional improvement in liquid assets relative to current liabilities during that year. This ratio then falls sharply to 0.87 in 2025, aligning closer to earlier levels and reflecting a potential normalization or adjustment in liquid asset levels.

The cash ratio, which is a more conservative measure indicating the availability of cash and cash equivalents to settle current liabilities, follows a comparable pattern. It decreases from 1.42 in 2021 to 0.65 in 2022, and further to 0.58 in 2023. The spike to 4.21 in 2024 signifies an extraordinary increase in cash holdings relative to short-term obligations, while the subsequent decrease to 0.72 in 2025 suggests a significant reduction in available cash.

Overall, the data reflects a period of liquidity stress during 2022 and 2023, with ratios indicating diminished short-term financial robustness. The remarkable surge in 2024 across all three ratios suggests a temporary phase of high liquidity, potentially driven by specific strategic or operational factors, which then normalizes by 2025. These fluctuations highlight the importance of examining underlying financial activities to understand the causes of such peaks and troughs in liquidity.

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Additional liquidity measure

The analysis of Tapestry Inc's cash conversion cycle (CCC) over the specified period indicates a trend of gradual increase from June 30, 2021, through June 30, 2024, followed by a slight decrease in 2025. Specifically, the CCC extended from 76.23 days in 2021 to 98.74 days in 2022 and further to 105.86 days in 2023. This upward trajectory suggests that the company's operating cycle has become lengthier, implying that it takes increasingly more days to convert inventory and receivables into cash.

Between June 30, 2023, and June 30, 2024, the CCC decreased marginally from 105.86 days to 101.74 days, indicating a modest improvement in the efficiency of the company's working capital management. However, the overall pattern still reflects a prolonged cycle compared to the earlier years.

Continuing into the 2025 period, the CCC declined further to 98.23 days, yet it remains elevated relative to 2021 levels. The observed fluctuations could be attributed to various operational factors, such as changes in inventory turnover, receivables collection periods, or payment terms negotiated with suppliers.

In conclusion, Tapestry Inc's cash conversion cycle demonstrates a trend of increasing duration over the analyzed years, signaling potential challenges in inventory management or receivables collection. The slight reductions observed in 2024 and 2025 indicate efforts toward improving operational efficiency, but the cycle remains relatively prolonged, potentially impacting liquidity and cash flow management.