At New York Fashion Week in September, Coach unveiled its Spring-Summer 2023 collection with new global ambassador, rapper Lil Nas X of Satan shoe fame, who is fronting the brand’s “Courage To Be Real” campaign. The initiative has succeeded in attracted younger customers and prompted brand fans to share their own user-generated stories in response across social media.
Lil Nas X joins a growing group of 40-and-counting brand ambassadors that include Jennifer Lopez, Megan Thee Stallion, Michael B. Jordan and others who speak to Coach’s evolution from “accessible” to “expressive” luxury.
In a Nutshell: Tapestry is working on phase two of its agenda: how to drive sustainable growth.
CEO Joanne Crevoiserat told investors during a conference call that Tapestry’s strategic agenda should “drive strong, sustainable growth by powering our iconic brands to move at the speed of the consumer in an ever-changing world.”
Achieving certain targets requires resiliency, continuous innovation and adaptability to pivot and evolve, she said. “During the quarter, we did just that. Although the landscape continued to shift at a rapid pace, we were nimble and responsive to change, remaining on track to deliver our fiscal year earnings target, excluding the impact of currency, while intentionally advancing our long-term initiatives,” Crevoiserat added.
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Tapestry acquired 1.4 million new customers just in North America during the first quarter.
Crevoiserat said compelling omnichannel experiences helped grow Tapestry’s DTC businesses while global stores led overall growth by driving traffic increases as consumers continued to embrace in-person experiences. Also helping growth were AUR (average unit retail) increases across each brand’s category globally, while data and analytics enhanced go-to-market strategies, including assortment planning and pricing optimization. Crevoiserat said Tapestry’s brands “represent tremendous value in the marketplace [and] we are seeing pricing power.”
A localized popup in Korea celebrating Coach’s legacy through the lens of an American neighborhood complete with an interactive post office, coffee shop and bakery is just one of the company’s immersive new experiences. Coach recently launched its first virtual store to kick off the holiday season.
Crevoiserat said Coach will remain “disciplined” with discounting. “To this end, this holiday, we are focused on winning with consumers through emotional product and storytelling, including impactful visual installations in stores,” she said.
Kate Spade is trying to become an emotional, lifestyle-oriented brand with greater global reach. In addition, the brand is growing new handbag lines in fashion shapes to bring in a younger, more diverse customer through TikTok, Pinterest and YouTube. Kate Spade’s fall campaign included the brand’s first foray into the metaverse through a digital townhouse. The Have a Ball campaign has local influencers work with store associates to co-create content.
At Stuart Weitzman, Covid pressure the China business, although North America and the wholesale channel held up. “We sparked consumer desire with high emotion product and a compelling assortment as we lean into our authority in occasion wear and built on our casual foundation,” Crevoiserat said. “Recent introductions continue to resonate with our consumer base, specifically wear to work styles as we capitalize on the shifting needs within the market.” Kim Kardashian is the brand’s newest ambassador.
Net Sales: Net sales for the first quarter ended Oct. 1 rose 1.73 percent to $1.51 billion from $1.48 billion a year ago. High-single-digit gains in store revenue offset a high-single-digit decline in digital sales. Still, digital revenue was still up over 35 percent and more than tripled from Fiscal Year 2019.
Chief financial officer Scott Rowe said wholesale sales rose over 20 percent due in part to “$15 million of earlier-than-expected shipments across key accounts globally.” Most of Tapestry’s current inventory includes core and seasonless styles, which should help the company during the holiday season.
Tapestry said outsized gains in other parts of Asia, Japan, and Europe more than offset the 11 percent decline in Greater China due to Covid-related disruptions.
By brand, sales at Coach were essentially flat at $1.12 billion from $1.11 billion. Kate Spade sales rose 7.5 percent to $321.9 million from $299.5 million. Sales at Stuart Weitzman slipped 1.8 percent to $65.3 million from $66.5 million.
Earnings: Net income for the quarter fell 13.9 percent to $195.3 million, or 79 cents a diluted share, from $226.9 million, or 80 cents, in the year-ago quarter.
Wall Street was expecting diluted earnings per share at 75 cents on revenue of $1.5 billion.
The company lowered guidance Fiscal 2023 due to foreign currency headwinds. It now expects diluted earnings per share of between $3.60 to $3.70 on a revenue range of $6.5 billion to $6.6 billion. Excluding the currency headwinds, Tapestry’s earnings outlook remain unchanged.
Tapestry also said its more modest revenue outlook in North America and Greater China is expected to be fully offset by outperformance in the rest of Asia and Europe, as well as additional expense reductions.
CEO’s Take: “We will continue to be disciplined in advancing our strategic objectives through an unwavering focus on the consumer and a commitment to innovation,” Crevoiserat said.