Tapestry has reported a double-digit sales growth for the third quarter, with an excellent performance at Coach more than offsetting declines from Kate Spade and the divestiture of Stuart Weitzman.

The company delivered revenue of $1.9 billion in the quarter ended March 28, up 21 per cent year-on-year on a reported basis and 19 per cent in constant currency.

According to GlobalData MD Neil Saunders, Tapestry entered the quarter with a range of headwinds, including the loss of $46 million in sales from the now-sold Stuart Weitzman business and the continued pressure at Kate Spade.

However, the retailer easily overcame the challenges and produced impressive growth, all thanks to Coach, whose sales surged 31 per cent during the quarter.

The analyst described Coach’s performance as one of its best in recent history and one of the most impressive in all of retail. While currency fluctuations contributed a small part to the growth, he said the main drivers were selling more product and selling at higher prices.  

The brand’s handbag units rose more than 20 per cent while the average price increased at a low double-digit rate.

More Gen Z customers 

Saunders said Coach’s appeal to Gen Z continues to grow as it accelerates up various brand rankings among the younger cohorts. 

“This resulted in over 800,000 new Gen Z customers making transactions since last year, something that is driven by marketing and design strategies that are attuned to their aesthetics and needs, and which make them willing to pay for Coach’s premium products,” he elaborated.

The brand also added new customers from other generations, with some trading down from more expensive luxury brands while others being average customers who are happy to pay a premium for classic designs, quality and craftsmanship, the analyst continued.

“The interesting thing about customer acquisition is that it shows that Coach is winning on multiple fronts and with multiple consumer groups. 

“In our view, not being overly reliant on one segment or driver gives the numbers balance and suggests that Coach has a long runway of growth ahead – even if it won’t always produce increases as heady as this quarter’s,” Saunders said.

Kate Spade’s decline is a ‘footnote’

Saunders said the continued decline at Kate Spade became “something of a footnote” in the company’s results thanks to Coach’s brilliant performance.

The brand’s third-quarter revenue slid 10 per cent, following a 14 per cent drop in the second quarter.

“While Tapestry once wanted to become a bigger house of brands with the Capri acquisition, it has now become a pure-play company dominated by Coach,” Saunders commented. “There is nothing wrong with this, even if it remains important to fix Kate Spade.”

By geography, Tapestry’s North American sales were up 20 per cent, and improved customer penetration in Europe helped produce a 31 per cent growth. However, the star of the show was China where sales increased 61 per cent. Sales in Japan fell 10 per cent, while other Asian markets rose 24 per cent.

The company has raised its full-year outlook, expecting revenue to grow approximately 14 per cent to $7.95 billion, compared to the prior guidance of $7.75 billion.