Tapestry Inc (TPR)

The comprehensive analysis of Tapestry Inc.’s solvency ratios, based on the provided data, indicates a consistent presence of zero debt-related ratios throughout the reporting period from September 2020 to June 2025. Specifically, the Debt-to-Assets Ratio, Debt-to-Capital Ratio, and Debt-to-Equity Ratio remain at 0.00 across all dates, implying that Tapestry Inc. has reported no outstanding debt or leverage on its balance sheets during this timeframe.

This persistent absence of debt suggests that the company is financed entirely through equity, with no reliance on borrowed capital. The lack of debt reduces financial risk associated with debt obligations, interest payments, and leverage-induced volatility, positioning the firm as entirely equity-financed.

However, attention should be drawn to the Financial Leverage Ratio, which has fluctuated over the period, ranging from approximately 2.54 to a peak of 5.19. This ratio measures the extent of financial leverage relative to equity; values above 1 typically indicate the use of debt, but since all debt ratios are zero, these figures likely reflect the company's use of other financial structures or accounting adjustments rather than traditional debt. The notable increases in the ratio, particularly towards the end of the period, may indicate changes in capital structure, off-balance-sheet liabilities, or adjustments in equity and assets, but without debt, these movements do not correspond to leverage in the conventional sense.

In summary, Tapestry Inc. exhibits zero leverage as evidenced by the debt ratios throughout the period, underscoring a debt-free capital structure. The variations in the financial leverage ratio merit further investigation to elucidate underlying factors driving its fluctuations, especially in the absence of debt. Overall, the company's solvency appears robust with no immediate liabilities linked to borrowed funds, though this also implies reliance on equity financing, which may influence growth strategies, risk profile, and return metrics.

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Coverage ratios

Tapestry Inc.'s interest coverage ratio has demonstrated significant variability over the observed period. In the fiscal quarters ending September 2020 and December 2020, the ratio was negative, at -5.93 and -5.18 respectively, indicating that the company's earnings before interest and taxes (EBIT) were insufficient to meet interest obligations, reflecting substantial financial distress during that time.

Beginning with the quarter ending March 2021, the interest coverage ratio transitioned into positive territory, registering at 5.73, and subsequently experienced a marked and consistent improvement through June 30, 2021 (13.59), September 30, 2021 (15.54), and December 31, 2021 (17.48). This upward trajectory persisted into March 2022 (18.91) and June 2022 (20.36), reaching a peak of 26.06 in December 2022. The continued trend of strengthening coverage was evident in early 2023, with ratios of 34.75 in March and 42.42 in June, indicating a robust ability to service interest expenses.

However, the ratio declined noticeably towards the end of 2023, dropping to 35.19 in September and further decreasing to 16.13 by December 2023. The subsequent quarters of 2024 reflected a continued downward trend, with ratios of 11.70 in March, 9.10 in June, and 8.02 in September. By the end of this period, the ratio rebounded slightly to 9.00 in December 2024, and projections for 2025 suggest a stabilization with anticipated ratios of approximately 10.31 to 11.00.

Overall, the company's interest coverage ratio indicates a period of severe financial stress in late 2020, followed by a substantial and sustained improvement through 2021 and into 2022, pointing to stronger earnings and enhanced capacity to meet interest obligations. The notable decline beginning in late 2023 suggests a potential weakening in earnings or increased interest expenses, which warrants ongoing monitoring to assess future financial stability.