Tapestry CEO blames designs for lacklustre holiday sales
Fashion retailer Tapestry has reported lacklustre holiday figures and a drop in sales at Kate Spade brand, blaming falling tourist spending and a slowing global economy.
Victor Luis, Tapestry CEO, said the company’s performance fell short of expectations in the face of “an increasingly volatile macroeconomic and geopolitical backdrop”.
“At Coach, we delivered continued growth driven by positive global comparable store sales, reflecting our compelling offering across categories.”
At Kate Spade, however, Luis said that although the company has made continued progress in its integration efforts and execution of strategic initiatives, including the deliberate pullback in wholesale disposition, comparable-store sales were below expectations, impacted by the lack of distinctive newness in the final collections from the prior design team.
For the second quarter, sales at Coach, whose handbags and accessories contribute about 71 per cent of Tapestry’s business, rose about 2 per cent, to US$1.25 billion. However, sales at Kate Spade, which it bought in 2017, fell 1.6 per cent to $428 million.
Tapestry posted an increase in net income for the quarter to $254.8 million,from $63.2 million a year earlier. Net sales rose from $1.79 billion to $1.80 billion,
Neil Saunders, MD at GlobalData Retail, said although Tapestry traded well last year, the results show it stumbled during the most important retail period at the end of the year.
“By the company’s historic standards, revenue growth of 0.9 per cent is a spiritless performance,” Saunders said.
“That this came at a time of high consumer spending growth makes the outcome even more concerning as it points the finger of blame firmly at Tapestry.”
Saunders said one of the issues at Coach over the holiday period was a relatively lacklustre product line up.
“While the range was not terrible, neither was it particularly compelling. There was a distinct lack of ‘must have’ items and bag silhouettes, and most of the assortment looked very similar to that offered earlier in the year.
“In a market where consumers had money to spend and were actively shopping around, such an approach was not good enough,” he said. “In our opinion, the range of gifting options was also poor: not nearly enough effort was put into producing holiday lines to appeal to different price points and types of consumer. Ultimately, these missteps cost Coach sales and market share.”
Overall, Saunders said, the numbers represent a roadblock on Tapestry’s journey to becoming a much larger brand powerhouse.
“We believe that the company has the potential to overcome such an obstacle – but only if it quickly gets back to delivering strong collections that engage and inspire customers.”