The accessible luxury conglomerate plots expansion strategy amidst forthcoming acquisition of Capri
Despite seeing a slight decrease in sales from $6.68 billion in 2022 to $6.66 billion in 2023, Tapestry remains forward-looking, especially with its imminent acquisition of Capri. The minor dip was attributed to a reduction in the US market, even as international markets showed promise.
Today, the New York-based conglomerate, which houses brands like Coach, Kate Spade, and Stuart Weitzman, unveiled its Q4 and annual results, which fell below anticipated figures. These revelations come hot on the heels of the company’s announcement regarding the acquisition of Capri, a deal pegged at $8.5 billion.
The financial community keenly anticipates 2024, the year when Tapestry is set to finalize the acquisition of Capri. Although Tapestry alluded to this major acquisition, it refrained from offering an updated forecast based on the combined revenues of both entities. After the merger, the conglomerate’s annual revenues are projected to exceed $12 billion. For its part, Tapestry aims for $6.9 billion in 2024, marking a 3-4% growth, while maintaining its target of achieving $8 billion by 2025.
Our key strategic priorities for 2024 include enhancing marketing to resonate with our target audience, spurring growth in primary categories, exploring untapped segments like sneakers and ballet flats, amplifying our presence in China, and augmenting our digital imprint.
Joanne Crevoiserat, Tapestry’s CEO
Although 2023 saw Tapestry strengthen its foothold in China, it hit rough waters in the US and North America, where sales dwindled by 8% in Q4 and 2% annually. Contrarily, Q4 sales in Asia surged by 50% in regions like Greater China and Japan. Direct-to-consumer sales registered a 2% Q4 growth, with physical store sales noting a slight boost and digital sales accounting for almost 30% of the total.
Direct-to-consumer sales also grew 2 percent in the quarter, with a low-single-digit gain in stores and 3 percent for the year where brick-and-mortar sales rose in the mid-single-digits. Digital now represents nearly 30 percent of overall sales, the company said.
Dissecting performance by brand, Coach managed to stay afloat. However, both Kate Spade and Stuart Weitzman encountered challenges.
In the fourth quarter, Coach’s sales rose 3 percent to $1.25 billion from $1.21 billion the prior year. Kate Spade’s sales declined 10 percent to $309.5 million from $344.1 million the prior year, while Stuart Weitzman fell 13 percent to $62.6 million from $71.8 million the year before. In the fiscal year, Coach’s sales increased 1 percent to $4.96 billion from $4.92 billion in the year ended July 2, 2022. Kate Spade’s sales fell 2 percent to $1.42 billion to $1.45 billion the year before. Stuart Weitzman was down 11 percent to $281.6 million from $317.7 million the prior year.
Elaborating on standout performers, Crevoiserat mentioned, “Small leather goods and lifestyle products from Coach made notable top-line contributions during the period. We’ve also seen global and North American growth in handbag AUR [average unit retail] for both the quarter and the year.”
Repositioning Coach from “accessible luxury” to “expressive luxury” seems to resonate, particularly with Gen Z, as it accentuates self-expression, inclusivity, and sustainability. Coach CEO Todd Kahn highlighted, “The innovation we’re bringing, the storytelling around it, all under the umbrella of expressive luxury, is working and will continue to work.”
Crevoiserat also emphasized the initial success of Coachtopia, a sub-brand aimed at Gen Z, saying, “Coachtopia is off to a strong start, garnering significant consumer attention. While still a small portion of the assortment, it’s tracking a year ahead of our original projections.”
In wrapping up the earnings call, Crevoiserat expressed Tapestry’s readiness to finalize the Capri acquisition.
The portfolio at Capri, including Michael Kors, comprises robust brands well-poised in attractive market segments. By bringing together six iconic brands with a heritage in design and craftsmanship and leveraging our modern consumer engagement platform, we will drive greater innovation, consumer connectivity, and cultural relevance creating superior value for our consumers, employees, communities, and shareholders around the world.”
Joanne Crevoiserat, Tapestry’s CEO
Following the announcement, Tapestry’s stock edged upwards by 0.8%, closing at $34.60 on Thursday.