holiday period.  “Even though it was up against a tougher prior year comparative, the luxury firm still managed to beat last quarter’s already high growth rate,” said Saunders. “The numbers are even more exceptional given that Tapestry has lost contributions from the Stuart Weitzman business, which it sold last year. When this is accounted for, underlying sales are up by an even better 17.1 per cent.” Meanwhile, Christine Russo, the principal of Retail Creative and Consulting Agency (RCCA), argued that Tapestry is not only taking market share but expanding the sector, reporting a gain of 3.7 million new customers. “Gen Z is responding to its product strategy, precinct discipline and storytelling.” However, for as great as Tapestry’s overall numbers were this quarter, both retail experts noted a significant weakness in the brand’s operations: Kate Spade.  Tapestry is relying too heavily on the success of Coach  “Although the group numbers are exceptionally good, they are all driven by Coach, which is offsetting a very weak performance at Kate Spade,” said Saunders.  To provide a point of comparison, Kate Spade’s net sales reached only US$360 million, falling below the previous estimate of US$368 million and representing a 14 per cent decline on a reported and constant-currency basis compared to the prior-year period. Fortunately for Tapestry, Kate Spade is a relatively small part of the business, so, in material terms, this brand’s sales slump doesn’t drag the corporation’s overall performance down by too much.  “Even so, such a miserable set of numbers underlines how much work remains to be done in rebuilding the brand,” said Saunders.  Similarly, Russo remarked, “The Coach brand is the superstar, but Tapestry runs the risk of its commitment to Kate Spade going on for too long. They need to be more disciplined about the timing of meeting benchmarks.” Reviving an underperforming brand can further boost Tapestry’s profitability in Q3 While Kate Spade’s results this quarter were disappointing, Saunders noted that this wasn’t due to a lack of effort by Tapestry to polish the brand.  “Some of the sales declines are the result of a deliberate pullback on promotions and deals across the quarter, which are designed to position the brand as a more aspirational and accessible luxury label,” he said.   “These moves often cause pain before they show benefits, but, as the previous reinvention of Coach showed, they usually pay dividends over the longer term.  “At Kate Spade, we detect early movement, with awareness of and affinity for the brand increasing among younger shoppers, thanks to sharper marketing and recent stylish handbag drops. There is, however, a long way for Kate Spade still to travel on the journey to reinvention.” Compared to its sister brand at Tapestry, Coach has been more agile in producing refreshed styles and reintroducing popular classic designs that appeal to a younger consumer cohort. Not to mention that the brand’s heightened investment in advertising spend over the holiday season was a smart move on Tapestry’s part. “While advertising creates awareness, it does not automatically convert interested consumers into buyers. This can only be achieved by having the right product at the right price point.” Here, Saunders explained, Coach excelled on two fronts. First, it innovated across its handbag styles with plenty of newness for the holidays. Second, it has gently expanded the assortment, making categories such as footwear and accessories a more prominent part of the mix. This has allowed Coach to capitalize on the brand’s strong appeal by increasing the share of wallet among shoppers who buy more items. “Looking forward, while it may be hard for Coach to sustain the levels of growth it is currently producing, there is enough headroom from customer acquisition and category and geographical expansion to sustain good numbers,” concluded Saunders.  “The real opportunity, however, is to course-correct the Kate Spade brand. If this engine can be restarted, it will give Tapestry even more lift.” Further reading: Can Kate Spade take a page out of Coach’s playbook to spark a comeback?