Mainland China has delivered a hefty revenue increase for Tapestry – the owner of the Coach, Kate Spade, and Stuart Weitzman brands — which has helped the US company make operating income gains for a third consecutive quarter.
In the three months to March, sales in China rose by 175 percent versus the same period last year when the Covid-19 pandemic first hit. Importantly, they were also up by 40 percent compared to the same three months in 2019 pre-pandemic. Global digital sales, meanwhile, grew in triple digits.
Among Tapestry’s trio of brands, affordable luxury house Coach — best known for its handbags — did most of the heavy lifting. While company sales increased by 19 percent to 1.27 billion in the fiscal third quarter, Coach’s revenue jumped 25 percent to 964 million. Kate Spade’s 252 million showed a lackluster one-percent increase, while shoemaker Stuart Weitzman — with 28 percent of its sales in China — generated 57 million, up by 13 percent.
At the operating income level, both Kate Spade and Stuart Weitzman remained loss-making, while Coach climbed to 251 million. That helped swing Tapestry — currently ranked 11th in our China Global Luxury Index — to an overall operating profit of 117 million in fiscal Q3 from a 686-million operating loss over the same period last year. Much of that loss was at Stuart Weitzman, and it has been reduced significantly in the interim.
While Mainland China has become a key market for Tapestry, accounting for 15 percent of its total sales (17 percent in Coach’s case), North America remains the core driver with a 57-percent share. There, sales rose in the mid-teens, returning the company to pre-pandemic levels helped by recruiting approximately 700,000 new customers through e-commerce channels, a “meaningful increase” versus the prior year, according to Tapestry.
CEO Joanne Crevoiserat said in a statement on Thursday: “Our third-quarter results significantly outpaced expectations, and we are increasingly optimistic about our ability to generate long-term top and bottom-line growth.”
A driver of that growth is Tapestry’s Acceleration Program, which aims to achieve a more consumer-centric approach and focus on “high-return” initiatives while also reducing promotional activity.
Among the highlights of the program in Q3 were:
Adding new customers via e-commerce channels in North America and leveraging social media to drive engagement with Millennials and Gen Zers
An increase in purchase frequency through enhanced and consistent brand experiences and reactivating lapsed customers
Growth in China using integrated brand-building strategies and new experiences that appeal to Chinese consumers, though not always
Drastically cut SKU counts by 30-50 percent, resulting in more focused product messaging and lower promotional activity
Data and analytics tools across platforms to quickly respond to changes in consumer preferences and demand
Streamlining stores with 49 closures year-to-date, a net decrease of 94 stores from the prior year.
Looking ahead, Crevoiserat said: “While the environment remains volatile, we see encouraging signs of recovery as vaccination efforts progress, resulting in increased consumer confidence and improving in-store traffic trends.”
Shares in Tapestry opened 4.5-percent down on Thursday morning at 46, but year-to-date, they had increased by 48 percent to 48.40 at last night’s close.