The next chapter of Tapestry Inc. begins with Joanne Crevoiserat.
The fashion house — parent company to the Coach, Kate Spade and Stuart Weitzman brands — revealed its plans Tuesday morning for Crevoiserat, who had been serving as head of the company on an interim basis since July, to take on the role of chief executive officer permanently. She is also expected to join Tapestry’s board.
“Joanne is the best candidate,” Susan Kropf, Tapestry’s chair of the board, said in a statement. She cited Crevoiserat’s extensive retail history and added, “Joanne has a passion for our brands and our company, deep financial and operational expertise and a belief in the power of our teams.”
Before joining Tapestry in August 2019 as chief financial officer, Crevoiserat held senior leadership roles at Abercrombie & Fitch, Kohl’s, Walmart and Filene’s.
In her new role, Crevoiserat is joining a small, but growing, list of female ceo’s at a major fashion house. Moreover, it marks the end to Tapestry’s c-suite shuffle. The news seemed to please Wall Street, at least enough to push the stock up nearly 3 percent during Tuesday’s trading session. The group’s shares closed up 0.71 percent at $21.42.
“We continue to view [Tapestry] as one of the better-value names in the space and, based on our recent incoming call volume, we believe investors are beginning to take notice,” Ike Boruchow, senior retail analyst at Wells Fargo, wrote in a note earlier this month.
Tapestry’s leadership team has been in flux since September 2019, a month after Crevoiserat joined, when former ceo Victor Luis was pushed out. Luis was immediately succeeded by Tapestry chairman Jide Zeitlin, who was appointed to serve as interim ceo. Last March, Zeitlin agreed to remain in the corner office for at least three years.
But four months later, Zeitlin himself resigned after a 2007 #MeToo allegation resurfaced, at which time Crevoiserat took over on an interim basis.
The heads of all three brands — Joshua Schulman at Coach, Anna Bakst at Kate Spade and Eraldo Poletto of Stuart Weitzman — have also all left the company within the last 12 months. In addition, Carlos Becil, Coach’s chief marketing officer, quietly departed Tapestry earlier this year.
A continual changing of the guard is a source of stress at any company but it’s especially troubling amid a global health pandemic that has caused mass unemployment and retail stores around the world to close for months on end.
Not only that, but Tapestry has been struggling with declining revenues and a portfolio of brands that left many wondering if they were worth the investments in the first place. Kate Spade — and what some critics view as a dated assortment — has been a source of contention for more than a few quarters. All in all, Tapestry logged a $652 million loss in the year ended June 27, impacted substantially by COVID-19.
Crevoiserat has not only helped curb the losses but also steered Tapestry to beating analysts’ expectations for the fourth quarter. The company is now anticipating another $200 million in savings during the next fiscal years thanks to cost-saving initiatives she implemented.
That’s one reason why, after three months in Tapestry’s c-suite, Crevoiserat was not just an obvious choice to fill the permanent ceo seat but an ideal one, said Craig Johnson, president of retail consulting firm Customer Growth Partners.
“It’s an excellent move for Tapestry,” Johnson said. “She has a great background, a great pedigree. And it removes any uncertainty about who the new ceo is going to be.
“Job one, when she became interim ceo, was to stabilize the organization,” he continued. “She’s done that and this kind of marks that last milestone in that effort. So it’s only natural that, having been in that role and done well in it, in terms of undertaking some of the cost structure and some of the other issues, that she should step into the permanent ceo role.”
Furthermore, with three new ceo’s in just over a year, Crevoiserat also represents stability in an otherwise tumultuous time.
“Joanne has proven herself on more than one occasion and notion of continuity and to promote someone from within carries a lot of strong positives,” said Simeon Siegel, managing director and senior retail analyst at BMO Capital Markets. “These days, consistency is a very valuable asset.”
Still, Crevoiserat has her work cut out for her. Tapestry’s shares are down about 18 percent year-over-year. And running three major fashion brands that are known for ready-to-wear, handbags and footwear at a time when many consumers are working from home — and festive dressing and events have been canceled indefinitely — is no easy task.
“Tapestry went from being a single brand to a multibrand story in recent history. And I think there’s a lot of questions about where those brands fit in that portfolio,” Siegel said. “Whoever is leading the company will have to decide how to approach that portfolio of brands.”
But, he added, “I don’t know that we should be expecting some massive changes from Joanne right now, given that during the last quarter she has been leading the company. The reality is, the company outlined its plans last quarter. When an internal person takes a new role, the ensuing actions are less transforming than they are evolutionary.”
Still others aren’t convinced the current leadership team will do much to improve the company’s standing.
“We do not expect Tapestry’s capital allocation strategy to change under Crevoiserat and do not expect to change our stewardship rating,” David Swartz, an analyst at Morningstar, wrote in a note. “We have assigned a ‘poor’ stewardship rating to Tapestry based, mainly, on our view that it overpaid for [Kate] Spade and [Stuart] Weitzman. Given the problems with both brands, we do not anticipate Tapestry to pursue further acquisitions in the foreseeable future and expect cash to be returned to shareholders instead. The firm has put dividends and share repurchases on hold during the pandemic, but we expect both to resume in fiscal [year] 2022.”
To help rightsize the ship that is Tapestry, the company will need to focus on accelerating its cost-saving efforts and then work to build and grow the operation, Johnson said. The most obvious way to do that, he added, is to first reduce the store fleet.
Tapestry had 1,567 brick-and-mortar locations around the globe — 958 Coach, 420 Kate Spade and 189 Stuart Weitzman physical units at the end of the last quarter. Johnson said that was still too many.
“Clearly they’re overstored versus demand,” he said. “Store traffic right now is not just flat, it’s negative. Most of the growth in retail is coming from the online side.
“You want to go where the customer is going,” Johnson continued. “You fish where the fish are and women are fishing in areas other than apparel and accessories. They still obviously buy apparel and accessories, but out of the share of the wallet, more of that is being devoted to the home these days. Tapestry really needs to overdevelop and nurture the other sides of the fashion platform, the lifestyle platform that they’ve been attempting to develop.”
That includes reducing both Coach and Kate Spade’s dependence on handbags, another category that has been down, even pre-COVID-19.
“I’m not convinced that having a fleet of almost 1,500 stores, across the three brands, really makes a lot of sense at a time when so much of the market is moving online,” Johnson said. “Online growth isn’t going to reverse in the future; it’s going to continue growing. It may not grow six full points penetration, like it did these last six months. But it’s going to continue growing.”
Tapestry will release quarterly earnings Thursday before the market opens.