Tapestry Inc.’s chief executive officer Victor Luis is ready for more growth in China and around the world. But first, he is focusing on issues closer to home.
That includes a proposed ban on fur in New York City. If approved, the sale of fur products, such as apparel and handbags, would be prohibited within all five boroughs. And in a city that counts fashion as one of its thriving businesses, that’s more than a small inconvenience.
Luis has already said Tapestry, parent company to Coach, Kate Spade and Stuart Weitzman, is against the use of fur as part of the fashion house’s sustainability initiative. But this proposal includes shearling.
“We are, as a company, very, very clearly against the ban on shearling,” Luis told WWD on Thursday, and added that the company is in talks with New York City officials over the issue. In fact, he called the proposed ban “unheard of.”
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“The impact, if you really think about it, not just to us, but to the major employers in New York City, of banning shearling — whether it be in footwear, outerwear, ourselves, our friends and competitors in the business — would not be good business for New York,” he said.
“I don’t think from a sustainability perspective that [the ban] would achieve the intended results, if [the intended results are] the fair treatment of animals,” Luis added. “Especially when you think about the fact that we in the fashion business are really using what in essence is a byproduct from the food industry and we are recycling it and putting it into good use and I think that that is misunderstood within this process.”
In April, the proposal was moved to the Committee on Consumer Affairs and Business Licensing for further discussion. If passed, violators would be subject to fines between $500 and $1,500, and the potential for tax revenue lost could be in the billions.
Meanwhile, Tapestry’s growth trajectory continues with the company’s comeback officially under way — and it seems to have taken center stage in China.
“We are expanding globally with the focus on the Chinese consumer,” Luis told analysts on Thursday morning’s conference call, adding that business in China once again outperformed for the quarter.
“When you’ve got 1.3 billion people…that spells very sustained long-term growth,” he said.
That’s good news for a company whose stock has fallen 33 percent year-over-year. Investors, unsatisfied with continued macroeconomic headwinds, like trade war threats, and less-than-stellar sales, grew disenchanted with the company and its brands. And consumers did, too.
But Luis told WWD in February that the addition of Nicola Glass as Kate Spade’s new creative director marked a new direction for that label. So far, his predictions seem to be correct. Sales at Kate Spade during the most recent quarter were $281 million, up from $269 million a year earlier, as Glass’ collection, which Luis described as “optimistic femininity,” hit stores.
There was also strength in men’s wear, particularly at Coach, and footwear across all three brands.
“We’re really excited about our traction in men’s,” Joshua Schulman, ceo and brand president of Coach, told WWD. “It’s something that we’ve been talking about for a few seasons now. But it really accelerated this quarter with Michael B. Jordan as the face of Coach brand for men.”
Schulman said the company anticipates the lucrative men’s business to join the billion-dollar club over the next several years.
Meanwhile, the Coach C143 sneaker was a must-have item among both male and female shoppers, along with women’s booties and sandals.
And while many retailers are closing locations, Tapestry continues to open new stores. The company opened 17 stores during the quarter, including seven in mainland China, to end the period with a total of 1,502 stores across all three brands.
Investors seem to be sold, too. Tapestry shares jumped 8.4 percent Thursday after the third-quarter earnings release, to close at $33.34. The board of directors has also authorized a $1 billion share repurchase program.
“The company delivered what we believe will be the most surprising result relative to expectations this earnings cycle in our space,” Ike Boruchow, analyst at Wells Fargo, wrote in a note. “Simply put, investors were braced for a meaningful miss at Kate Spade, comp [and] margin volatility at Coach, a potential lowered [full-year] outlook and a walking back of their prior 2020 plan. [Double-digit EBIT — and earnings-per-share — growth.] And we ended up seeing essentially none of that.”
In terms of continued trade tensions, Luis said Tapestry only depends on China for about 4 percent of its supplier base. Still, the company continues to look at sourcing in other countries to mitigate risks should tensions with China escalate.
“It is impossible to do that in one full-swoop, as you can imagine. This will take some time,” Luis said. “The actual trade conflict has been kind of an up-and-down affair. At times we have felt like we would have a solution. And most recently things have gotten a bit more tense.”
Luis has also hinted at adding to the greater Tapestry portfolio. But just when — or which company — is still up in the air.
“We want brands that have the opportunity to grow,” Luis said. “And by that, I mean, within their category, multicategory, and from a geography perspective. We want brands where we can leverage the Tapestry platform that we have, which is an amazing supply chain and systems capability to help them grow quickly. And there are three categories that we have consistently stated that we like, which are handbags and accessories, footwear and outerwear in the most branded fashion categories. And those are the ones that we’re focused on.”