There’s still room for improvement for North American sales of the Coach brand, and hopefully that could get some help down the road from what appears to be a revival of the logo trend.
Joshua Schulman, president of the Coach brand, said, “There’s a very big logo trend happening in the industry. At Coach, we’re lucky enough to have a beloved icon of the brand in our heritage.”
Schulman, along with Tapestry Inc. chief executive officer Victor Luis, spoke with WWD after the company posted first-quarter results on Tuesday. According to the Coach brand president, the company saw early indications over the summer of a logo resurgence both at Coach, via select vintage Coach items, and at other European luxury houses.
According to Schulman, these cycles can last for some time, possibly as long as five or 10 years. And while there are plans to include logo product in all three tiers of Coach’s “good, better, best” strategy, the brand president was quick to note that the merchandise will be in “limited distribution and managed carefully. Luxury is all about managing the balance of scarcity and scale.”
For Tapestry, the Coach brand didn’t exactly have its best quarter for the three months ended Sept. 30. Global comparable-store sales fell 2 percent on a constant currency basis versus analysts’ expectations of a comps gain in the low single digits. Sales for the brand slipped 3 percent to $924 million.
Regarding North American sales, Luis said, “there’s nothing right now that we have that would lead us to believe a different macro-economic boost is taking place in the holiday quarter,” although he did emphasize that some inventory issues during the first quarter — such as getting product to the stores in hurricane-hit areas — have been resolved. The ceo added that the company is “focused on our own areas of control,” such as better product and the flowing in of the holiday assortment. The holiday push came two weeks earlier this year, mostly to tie-in with the advertisements in place for the newly introduced Coach X Selena Gomez Grace Bag.
Tapestry posted a first-quarter net loss of $17.7 million, or 6 cents a diluted share, on a sales gain of 24.2 percent to $1.29 billion. The loss was the result of acquisition costs connected with its $2.4 billion purchase of Kate Spade & Co. in July. On an adjusted basis, the company had net income of $117 million and diluted earnings per share of 42 cents. Wall Street was expecting EPS of 36 cents on sales of $1.31 billion. Following the Kate Spade acquisition, the company formerly known as Coach Inc. changed its name last month to Tapestry to better reflect its new brand umbrella, which also includes the Stuart Weitzman brand. The structure also means comps are reported on a global basis, instead of by geography.
Luis said despite a few glitches in the quarter due to calendar shifts and natural disasters, the company has returned to growth in the second quarter and remains “on track to achieve the annual guidance we set out for Tapestry in August.”
One area that will see more emphasis for Coach is the ability to customize product, and hopefully that would help the brand develop a greater emotional connection with consumers and bring in new brand loyalists. Coach has a monogramming station in 250 doors, which Luis said is a “bar brought to the front of the store” that also provides a hub for engagement with the consumer. The monogramming can be completed while the consumer continues to shop in the store. There are additional detailing options, such as the placement of select embellishments to a bag, in 35 stores and online.
On the horizon for both Kate Spade and Stuart Weitzman are some changes to their freestanding store formats.
Luis explained that the merchandise at Kate Spade traditionally had the new product for the month grouped at the front, following by earlier monthly groupings. The new visuals will be by product category, such as all ready-to-wear together. “We tested five stores in total, and are testing 10 in November,” Luis said, adding that so far, the brand has seen a lift in performance for rtw and an increase in footwear and handbags via an increase in conversion rates. The goal is to roll it out to more stores in the third quarter.
The Stuart Weitzman brand will feature a new store concept, with the first location to showcase the format at its Rodeo Drive site in January. “Our desire is to express a unique identity through color, branding materials, architecture and providing the consumer with a feeling of elevation and luxury,” the ceo said, adding particular attention has been placed on flooring since consumers will be trying on footwear.
Luis declined to comment on the status of the search for a brand president for Kate Spade, other than that it is ongoing. Former Kate Spade ceo Craig Leavitt exited in August following the acquisition, and Luis is overseeing the business for now. He also declined comment on rumblings that Kate Spade’s chief creative officer Deborah Lloyd could be exiting the brand. Luis said he is enjoying the time as interim chief “getting to know the team at Kate Spade.” As for Lloyd, Luis said “she’s amazing,” and called her a “creative leader; she’s doing an amazing job.” He said she is already hard at work designing for summer.
Shares of Tapestry rose 1 percent in trading Tuesday to close at $41.93.
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