“Of all the fashion categories, handbags and accessories are still the one that has the most untapped potential.”
That’s according to Victor Luis, chief executive officer of Tapestry Inc., which is the parent company to the Coach, Kate Spade and Stuart Weitzman brands. WWD caught up with Luis in a telephone interview following the company’s conference call to Wall Street analysts Tuesday after reporting fourth-quarter results. And with Luis noting that the premium handbag and accessories market is now more than $45 billion, growing at low-double digits globally, does he worry that at some point women might decide they already have too many bags?
In short, no.
“It’s the one category consumers use the most to help express their individuality,” the ceo said. He explained there is an “amazing, untapped opportunity [in] the developing markets, with new consumers coming into the space.” While Greater China is a big focus for each of Tapestry’s three brands, Luis is also looking further down the road to India, the Middle East and the South American markets. The company also operates in the global premium footwear and outerwear categories, which Tapestry estimates are at $30 billion and $12 billion, respectively.
The company on Tuesday said net income for the quarter ended June 30 rose 39.6 percent to $211.7 million, or 73 cents a diluted share, on a net sales gain of 30.9 percent to $1.48 billion. Adjusted diluted earnings per share was 60 cents, which easily beat Wall Street’s estimate of 57 cents on sales of $1.47 billion. The Kate Spade brand, which Tapestry acquired in July 2017, did better than expected. Anna Bakst, Kate Spade’s ceo and brand president, said on the call to analysts that the brand saw a pick-up in social media activity and in sales activity following the passing of the brand’s founder Kate Spade in June.
Investors liked the results, sending shares of Tapestry up 12 percent to $53.16 in trading Tuesday.
According to Luis, healthy sales activity, particularly for the Coach brand in North America, has been helped by an “unprecedented and wonderful confluence” of events that include “low unemployment, high consumer spending and a stock market at all-time highs, with asset prices increasing, that’s now in its 10th year.”
So is there a worry that a recession might be around the corner? Luis said, “We know that the markets will occasionally correct. Would that be 2019 or 2021? I don’t know. At some time that will happen, so we are being prudent in our planning to be prepared for that event.”
Further, the company has been diversifying its supply chain, and now has just 3 to 4 percent of handbags and accessories sourced in China, the ceo said, adding that Tapestry is in a better position than many other apparel firms. Moreover, the diversification would limit the impact of the talked about additional duties that could be applied to $200 billion worth of products, including handbags and accessories.
The company has been making some big investments in back-office systems, as well, to help with better planning in operations for all three brands and to have them on the same platform. It is also working on leveraging its digital connectivity and data analytics, as well as exploring AI and machine learnings for inventory management, merchandising and pricing analytics.
Joshua Schulman, Coach’s ceo and brand president, said in the telephone interview that Selena Gomez, a brand ambassador, has had an impact on North American sales, particularly in the $300 to $400 range. Further, the brand has two Chinese celebrities for its fall campaign, and will hold its first fashion show in Shanghai in December. “We believe that this will resonate with the Chinese consumer,” he told WWD.
During the conference call, Schulman also said the brand is on track to meet its goal of $1 billion in global men’s sales within its three-year planning horizon. Sales in the category for the year ended June 30 were $850 million.
Bakst said on the call that the company will be adding 60 to 70 stores globally, including those that will be acquired in Australia, Malaysia and Singapore when the company buys back those businesses. New creative director Nicola Glass is to unveil her first Spade collection this fall.
At Stuart Weitzman, ceo and brand president Eraldo Poletto said the brand is transitioning from a founder-led shoe manufacturer to a global, multicategory footwear and accessories brand.”
The brand has also made some investments in its supply chain teams is Spain, as well as adding infrastructure and capacity in the country to correct the development and delivery delays that has been a drain to the business. Further, the company is creating a signature everyday bag, and an evening bag collection since the brand already has a “stronger position in special occasion.”