Coach continued to chug along in the first quarter, pushing Tapestry Inc. to a strong start for its fiscal year — which is building off big growth last year.
Net income for the quarter ended Sept. 26 increased 30.9 percent to $360 million, or $1.76 a diluted share. Adjusted earnings tallied $1.82 per share — easily beating the $1.56 analysts forecast.
Sales rose 12 percent to $1.9 billion, excluding the impact of Stuart Weitzman, which was spun off to Caleres last year. That topped the $1.85 billion analysts forecast.
Coach sales continued to leap, increasing 16 percent to $1.7 billion. Kate Spade, which is retrenching in order to grow back from a stronger base, was down 10 percent to $233 million for the quarter.
“We’re bringing new customers into our brand and into the category,” crowed Joanne Crevoiserat, chief executive officer, in an interview with WWD. “We delivered revenue margin growth ahead of expectations and we saw strength of the world, including a beat in North America.
“We’re growing the market and we’re growing,” Crevoiserat said. “And what’s really notable is not just what we delivered, but it’s really how we’re delivering it. The capabilities and culture that we’re building are durable competitive advantages and those are on display.”
Tapestry has been building around what it’s dubbed the “Amplify growth strategy” — a three-year plan that was laid out last year, although its revenue targets were hit in Year One.
The strategy is focused on four key tasks.
Building emotional connections with consumers.
Fueling fashion innovation.
Delivering compelling experiences.
And leaning into the power of the company’s workforce.
Such strategies — whether they have three parts or five or more — are commonplace in the world of corporate fashion and tend to all sound very similar. But few plans produce the results Tapestry has enjoyed.
The company said it acquired 2.6 million new consumers during the quarter, 35 percent of them from Gen Z, while demand from existing customers rose.
Average unit retail prices on Coach handbags increased at low-double-digit rates in the quarter. Coach sales in North America, its largest market, rose 7 percent, backed up by 30 percent growth internationally.
“We’re driving our growth through our direct business, through new customer acquisition and through our core leather goods category,” Crevoiserat said. “We’re doing that in North America, comping the growth that we saw last year, and we’re doing that around the world. And I do believe that the way that we’re building growth at this scale is differentiated in the market.
“We see an opportunity to welcome more customers into the category. It’s a place where we have always played. Coach at its inception brought more customers into the category with high-quality leather goods, with high emotional resonance with the consumer and really grew the category. At the same time, it grew share. And we are continuing to do that.”
Crevoiserat said the idea is to “earn the right” to be Gen Z’s “first luxury bag purchase.”
“It is important to us that the value delivery is there,” the CEO said. “We spend a lot of time getting to know these customers and understanding what’s important to them, but we’re also bringing the magic. This understanding and turning insight into impact through our teams.”
Coach racked up $6.9 billion in sales last year and Crevoiserat said the $10 billion mark “is in our sights and I think there’s even growth beyond.”
Tapestry nudged up its outlook for the full year.
Revenues are expected to rise 6 percent to 7 percent to $8.5 billion to $8.6 billion, moving the range up $100 million from the initial forecast.
On top of sales of nearly $8 billion last year, which represented a 17 percent expansion, adjusting for currency and Stuart Weitzman, this is a slower, but significant move higher.
“What you’re seeing is compounding growth,” Crevoiserat said. “We’re delivering growth on top of the growth that we delivered last year. And our view is that our [total addressable market] is massive and we have an opportunity to continue to grow our share and grow our business in North America, our largest market, but also in international markets where we’re relatively underpenetrated.”
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