What happened
As the world’s largest luxury brands report slowing demand, affordable luxury is feeling the pinch too.
Tapestry, Inc. achieved net sales of $1.48 billion in the quarter ended March 30, 2024, flat on a constant currency basis and down 2 percent on a reported basis. This was driven by “a challenging consumer backdrop” in North America, where revenue fell 3 percent year over year despite the acquisition of 1.2 million customers in the region, over half of whom were Gen Z and millennials.
Gains were reported in Europe (up 19 percent) and Japan (up 2 percent), while sales in Greater China declined 2 percent compared to the same period last year. China’s performance is consistent with last year’s trend of “strong revenge spending,” stated Tapestry.
Trimming its forecast from February, the parent company of Coach, Kate Spade, and Stuart Weitzman now expects flat net revenues for the full fiscal year at $6.6 billion.
The Jing Take
Kate Spade and Stuart Weitzman continue to face headwinds as they struggle to maintain relevance with younger consumers. On a constant currency basis, net revenues at the two brands fell 5 percent and 17 percent, respectively.
“Kate Spade’s products have a great sense of design; from clothes to bags, they all have their own style. But at the same price, people are still more willing to buy from Michael Kors or Coach. Maybe this is the role of celebrity endorsement and brand marketing,” wrote Chinese netizen @Yummy on Xiaohongshu in 2023.
Offsetting these declines was Coach, which saw net sales increase 2 percent on a constant currency basis. In particular, its Tabby handbags remain popular, with Google searches for “Coach Tabby” reaching an all-time high in February 2024.
That month, the brand released a star-studded campaign called “Find Your Courage,” featuring virtual human Imma, rappers Lil Nas X and Youngji Lee, American actress Camila Mendes, Japanese model Kōki, and Chinese actress Wu Jinyan. Set in a virtual universe, the campaign showcases Coach’s Spring 2024 collection, including the new quilted Tabby shoulder bag.
By leveraging a popular product, celebrity endorsements, and AI, Coach stays at the forefront of Gen Z trends. The campaign hashtag “Courage to Be Real” has garnered over 25 million views on Weibo, while the product hashtag “Coach Tabby series” (#Coach蔻驰Tabby系列) has amassed 41 million views on Xiaohongshu.
“I was pleasantly surprised by the latest quilted Tabby lambskin model from Coach. It really captures my heart,” wrote Xiaohongshu user @fassionfruitgirl. “The delicate lambskin texture is irresistible, and [the bag] has slender rectangular proportions, an adjustable chain, and inner compartments with zippers. The platinum color scheme basically matches my entire wardrobe.”
Inspired by Coach’s archival 1970s designs, the Tabby, particularly the quilted denim edition, is praised in China for its “American retro feel,” aligning with Y2K trends.
While earning results were mixed, Tapestry has more pressing issues to contend with. Namely, the Federal Trade Commission is blocking its acquisition of Capri Holdings, which would give Tapestry a dominant share of the affordable luxury market. The FTC argues that the proposal would deprive consumers of competition for affordable handbags and dwarf every other competitor.
In response, Tapestry has stated that the Capri acquisition will help it gain a broader set of global luxury consumers and drive sustainable, healthy growth for Capri’s iconic brands.
“The bottom line is that Tapestry and Capri face competitive pressures from both lower- and higher-priced products. In bringing this case, the FTC has chosen to ignore the reality of today’s dynamic and expanding $200 billion global luxury industry,” Tapestry expressed in a statement in April.
No stranger to acquisitions, Tapestry is committed to solidifying its hold on the luxury market. The addition of Versace and Jimmy Choo would allow it to enter higher-end segments and position itself as a more formidable competitor against luxury rivals.
While full-year 2024 results are unlikely to wow, it’s clear that Tapestry has its eyes on a much larger prize.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.