Tapestry is projecting a significant annual growth rate of 6 percent to 7 percent and $8 billion in sales by 2025 — and it’s hoping Kim Kardashian will help it reach those goals.
The New York-based owner of the Coach, Kate Spade and Stuart Weitzman brands is holding an investor day on Friday morning before the opening of the stock market where it will lay out its targets for the next three years. At the event, the brand will also announce that Kardashian will become global ambassador of the Stuart Weitzman label.
Joanne Crevoiserat, chief executive officer of Tapestry, Inc., told WWD that Kardashian has been a longtime fan of the brand and “will help drive awareness with our target customer base.”
But while the Kardashian news may get the most buzz, it’s the numbers that have the management team at Tapestry the most energized.
In addition to its revenue goal, Tapestry is also projecting operating margin in the neighborhood of 19 percent, which would represent an expansion of approximately 100 basis points from fiscal year 2022.
The company is also calling for:
- Earnings per diluted share of more than $5 for a low-to-mid teens three-year compounded annual growth rate
- A cumulative cash return of $3 billion to shareholders by fiscal 2025
- A targeted dividend payout ratio of 35 percent to 40 percent
- Share repurchases of at least $700 million annually
These targets incorporate the company’s previously announced fiscal 2023 outlook.
By brand, Coach is expected to hit sales of $5.7 billion with an operating margin of 30 percent and a mid-single-digit three year compounded annual growth rate. Crevoiserat said the company’s flagship brand has been performing well as it continues to evolve, zeroing in on what the company refers to as “expressive luxury.”
Crevoiserat said luxury today is defined less by price and more by the opportunity to allow consumers to express themselves and showcase comfort in what they’re wearing, the CEO contended.
“We’re also broadening the aperture at Coach by acquiring more Gen Z consumers,” she said, a strategy that will continue.
For Kate Spade, she said the brand has been successful in “harnessing the power” of its name and embracing its “true DNA” while leaning into more lifestyle product and exploring global opportunities. Overall, the projection is for sales of $1.9 billion with high-single-digit growth and operating margins in the mid-teens, she said.
And at Stuart Weitzman, the plan is to grow in the low double digits over the three-year period, to $450 million, while increasing operating margin to the high-single digits.
“We’re building momentum behind the brand and amping up the heat,” Crevoiserat said. That will include focus on product, omnichannel opportunities and beefing up its marketing muscle by working with Kardashian.
“We’ve got a lot of growth ahead of us,” she said, adding that even during the pandemic, the company has been preparing its strategy for future growth and now it is ready to begin “playing offense.”
“Over the last two years, we radically transformed our company, with a sharpened focus on the consumer and commitment to brand building — delivering standout results,” Crevoiserat said. “From this strong foundation, we have tremendous runway and are poised to drive continued growth across each of our iconic brands. The environment is ever-changing, and we are ready to move at the speed of the consumer with agility and intention. Importantly, we are confident in our ability to fuel sustainable top- and bottom-line gains and generate significant cash flow, creating meaningful value for all our stakeholders in the years to come.”
The company also said it expects gradual recovery in Greater China from COVID-19-related disruptions with no further significant lockdowns or incremental supply chain pressures. It also sees no material worsening of inflationary pressures or further downturns in consumer confidence.
Crevoiserat said the corporation is in the midst of an “important transformation” designed to “harness our competitive advantage. We’re calling this new phase: Future Speed. Our mantra is to power our brands at the speed of the consumer, and getting the company wired to move with agility and meet the customers where they are.”
Scott Roe, chief financial officer and chief operating officer, said, “We have powerful brands that participate in attractive and durable categories with a business model that is both proven and profitable. We will remain balanced in our approach to fueling revenue gains, operating margin expansion and earnings increases. At the same time, we will continue to be disciplined allocators of capital, with a plan to return $3 billion to shareholders through fiscal year ‘25, supported by our strong free cash flow. Together, we believe this will drive significant total shareholder returns over our planning horizon.”
Asked if Tapestry would consider adding another brand to its portfolio, Crevoiserat said she believes there is a lot of “runway in our current portfolio” and the current focus is on “building a scalable platform” for the existing labels.
Instead of losing focus through acquisitions, Crevoiserat said the plan is to amplify and extend the competitive advantages of its three brands by building lasting customer relationships; focusing on fashion innovation and product excellent in core handbags and leather goods, while accelerating gains in footwear and lifestyle products, delivering a compelling omni-channel experience, and growing globally with a priority on North America and China, its largest markets, while exploring opportunities in under-penetrated regions such as Southeast Asia and Europe.
In August, Tapestry reported full-year results for fiscal 2022 with sales of $6.7 billion, an increase of 16 percent over the prior year’s $5.75 billion and 11 percent above 2019. Digital sales in the year hit $2 billion, more than triple fiscal year 2019, and now represent 30 percent of the company’s total revenue. Net income was $856 million, up from $834 million a year ago. The company’s projection for fiscal 2023 are sales of $6.9 billion and an increase of 3 percent to 4 percent, with earnings per share of $3.80 to $3.90, which would represent double-digit growth compared to the prior year.