8-K: Tapestry, Inc. Announces $2 Billion Accelerated Share Repurchase Program

Tapestry, Inc. has entered into agreements to repurchase $2 billion of its common stock through an accelerated share repurchase program, funded by a new term loan and existing credit facilities.

Summary

• Tapestry, Inc. has announced a $2 billion accelerated share repurchase (ASR) program.
• The company has entered into ASR agreements with Bank of America, N.A. and Morgan Stanley & Co. LLC.
• Tapestry will pay $2 billion to the dealers and expects to receive an initial delivery of 28.4 million shares on November 26, 2024.
• The final number of shares repurchased will be based on the volume-weighted average price of Tapestry common stock on specified dates during the term of each ASR agreement, less a discount.
• The final settlement of the ASR agreements is expected no later than the first quarter of fiscal 2026, ending September 27, 2025.
• The company is funding the share repurchases with $750 million of borrowings under a new term loan credit facility, approximately $1 billion of borrowings under its revolving credit facility, and cash on hand.
• Tapestry expects to refinance the term loan credit facility with the issuance of new debt or borrowings under other sources of existing liquidity, together with cash on hand.
• After giving effect to the ASR Agreements, there will be $800 million of availability for share repurchases under the share repurchase program authorized by the board of directors of the Company in May 2022.

Sentiment

Score: 7

Explanation: The document is positive due to the significant share repurchase program, but there are some concerns about the increased debt. Overall, it's a moderately positive development for shareholders.

Positives

• The company is returning a significant amount of capital to shareholders through share repurchases.
• The ASR program is expected to return over 100% of free cash flow in Fiscal 2025 to shareholders through dividends and share repurchases.
• Tapestry has additional capacity for future share repurchases beyond the ASR program.

Negatives

• The company is taking on $750 million in new debt to partially fund the share repurchase program.
• The final number of shares repurchased is subject to market fluctuations and adjustments.

Risks

• The company's actual results could differ materially from forward-looking statements due to various factors, including economic conditions, international risks, and competition.
• The company is exposed to risks associated with currency fluctuations and changes in economic or political conditions in the markets where they sell or source products.
• There are risks associated with the company's ability to retain brand value and respond to changing fashion trends.
• The company faces risks related to cyber security threats and data breaches.
• The company's ability to satisfy debt obligations and incur additional indebtedness is a risk factor.
• The company is exposed to risks associated with climate change and other corporate responsibility issues.
• The company faces risks associated with potential changes to international trade agreements and the imposition of additional duties on importing products.
• The company is exposed to risks associated with pending and potential future legal proceedings.

Future Outlook

The company expects to return over 100% of its free cash flow in Fiscal 2025 to shareholders through dividends and share repurchases and expects to refinance the term loan credit facility with the issuance of new debt or borrowings under other sources of existing liquidity, together with cash on hand.

Industry Context

This announcement reflects a trend of companies using share repurchases to return capital to shareholders, often funded by debt. This is a common strategy in the current market environment.

Comparison to Industry Standards

• The use of accelerated share repurchase programs is a common method for companies to quickly buy back shares.
• The funding structure, using a combination of new debt, existing credit facilities, and cash on hand, is typical for large share repurchase programs.
• The size of the repurchase program, at $2 billion, is significant and indicates a strong commitment to returning capital to shareholders.
• Other companies in the retail and consumer discretionary sectors have also announced similar share repurchase programs, indicating a broader trend in the industry.

Stakeholder Impact

• Shareholders will benefit from the share repurchase program, which is expected to increase earnings per share.
• Creditors may be concerned about the increase in debt to fund the share repurchase.
• Employees may be impacted by the company's financial decisions, but there is no specific information in the document.

Next Steps

• The company will complete the ASR program by September 27, 2025.
• The company will refinance the term loan credit facility.
• The company will continue to evaluate opportunities for additional share repurchases.

Key Dates

Keywords

share repurchase, accelerated share repurchase, ASR, capital allocation, debt financing, term loan, revolving credit facility, Tapestry, TPR, shareholder returns