Tapestry Inc – Consumer Demand Heading into Holiday
Season – 21 October 2021
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Specialist:
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Sonali Vanjani (SV)
Former VP, Business Integration & Strategic Pricing at Tapestry Inc
Agenda:
1. Holiday season demand and channel positioning in leather goods and handbag market
2. Tapestry's (NYSE: TPR) branding and lifestyle adoption across Coach, Kate Spade and Stuart
Weitzman
3. Tapestry’s D2C focus and promotional activity and trends
4. H1 2022 outlook and category performance expectations for holiday season
Contents
Q: How significant are the sourcing concerns for the luxury accessory category? There have been factory
shutdowns in footwear due to coronavirus and there are two-month delays, as well as cargo ships that are
docking for months at a time. Do you think the industry can supply this holiday season?
4
Q: What do you think about demand? You suggested that consumers are changing the way they’re shopping.
What might demand be like heading into this holiday season? It seems many brands or retailers are very up
in the air. There’s been a huge jump in consumer spending, built up because of the pandemic. Is this starting
5
to taper off or do you think consumers still have money that they’re willing to deploy?
Q: Could you break down Tapestry’s revenue by category and how that’s changed in the post-pandemic
environment? Have you noticed any significant changes or shifts in the company’s core products? Has there
been a shift from women’s handbags to more share of women’s accessories, or to footwear and lifestyle
categories?
Q: How strong is Coach for Tapestry in some of the lifestyle categories or sub-categories? Could you break
down lifestyle itself? Is the company making athleisure-type wear, is it housing, bedding wear? How is
Tapestry positioned for this category?
5
5
Q: What do supply issues mean for pricing? How do big luxury players or affordable luxury players use
pricing as a tool when supply is short? Can they maximise the full value of the products on shelf, given the
short supply, or is there still some promotional aspect to it?
Q: Could you break down Tapestry’s strong growth throughout China? What brands are successful there vs
not? How sustainable might this growth be?
Q: What are some challenges in building brand awareness internationally or within China?
Q: What is your assessment of Tapestry and its ability to manage different brands? Is there too much of a
focus on Coach? Is it not giving the right resources and attention to some of its sister brands? I know VF
Corp does a fantastic job of holding up its different brands such as North Face and others.
6
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Q: How did pricing work across Tapestry’s different brands? Was there a true differentiation in the way that
you managed your pricing strategy across different brands or regions, or did someone try to one-size-fits-all?
7
How do you consider international pricing strategy, given your exposure to it?
Q: What are your thoughts on the stagnation in the men’s category for Tapestry? Has it really flat-lined in
terms of being innovative? How important is that to the company’s strategic vision? In retail in general,
women lead the categories and then companies try to make up for it later in men’s.
Q: Tapestry has touted 900,000 new customer acquisitions through e-commerce channels. How sticky
might these customers be? Are they truly new customers or are they just shopping in a new channel?
7
8
Q: Can Tapestry revitalise the organisation domestically through an acquisition of a start-up D2C company?8
Q: It seems a lot of Tapestry’s sales are now D2C, with 10% being wholesale. How does that compare
historically to its distribution mix?
Q: Tapestry seems to be taking a much more proactive step in building out its D2C approach for Coach and
its other brands and focusing on this distribution channel rather than wholesale. The big issue these days is
other brands under Capri or VF trying to segue away from wholesale. Although the majority of Tapestry’s
revenues come through D2C and not as much exposure to wholesale, why has it not performed as well as
brands who were overexposed to wholesale? Could you expand on the peer group gap Tapestry has with VF,
Capri, Estée Lauder or Ralph Lauren?
8
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Q: Would Tapestry benefit from pushing its product through wholesale at a much bigger clip? If you were to
compare Coach and Michael Kors to the consumer, many would maybe think of them as the same in terms of
9
brand affinity.
Q: How would you compare Tapestry to other players in the market in terms of really knowing their
customer and then jumping over to some of that predictive analysis that you were referring to in some of
your models?
Q: How does Tapestry consider consumer profile and analysis and pricing strategy across the different
brands? Is it properly tracking the consumer across Kate Spade in the same way it does with Coach, or is
there some difference in data quality, reliability or overall amount of metrics and data?
Q: What other brands do you think are leveraging the insights and analysis better than Tapestry?
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Q: To what extent can Tapestry innovate, particularly in the lifestyle segment? Is there true innovation going
on here or is it a replenishment of last year’s styles in different colours and formats? How innovative is
Coach or other brands under Tapestry?
10
Q: You’ve been at Coach through its different ups and downs. Could you speak to that loss of the customer
and how challenging it is to regain? You have that customer who hasn’t bought since high school or
elementary or middle school, but they’re older now. Why would they buy Coach vs brands such as
Ferragamo, or something in Nordstrom? At what point do you realise your brand is failing?
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Q: You mentioned the alienation of the customer. Can the company tell where they’re shifting to?
Q: What does sustainability mean in this industry and how resilient are some apparel companies in their
sustainability practices? Companies want to make sure that what they’re posting is really beneficial to the
supply chain as a whole. Just because the cotton or knit is sourced in a different country doesn’t mean the
people in that factory are still not underpaid significantly. What is the risk to some of these sustainability
goals? Are they actually real goals?
Q: What styling preferences or sub-categories do you think will perform well this holiday season? You
mentioned that as the pandemic went on, people stayed in and athleisure and ready-to-wear were probably
performing better. As we enter the holiday season, however, people are going out more and moving past
coronavirus.
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Q: You mentioned the struggles around Stuart Weitzman and Kate Spade. Could you properly define those
brands? How are they differentiated? Are they properly messaging that differentiation to the consumer? We
think Nike, we think at functional performance. We think Lululemon, we think quality athleisure.
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Q: What is Coach’s ability to expand throughout apparel, from intimate apparel to leisurewear? Has Coach
built a presence in this aspect? If not, why?
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Q: What are your expectations for ad spend and the ad profile of Tapestry or Coach this holiday season?
How significantly are they spending on new customers to drive traffic? Is there a point where you spend so
much the value is not there?
Q: What do investors commonly overlook when considering the competitiveness of Tapestry, its brands or
overall weaknesses? Is there anything top of mind to you?
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Tapestry Inc – Consumer Demand Heading into Holiday
Season
Transcription begins at 00:00:10 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview entitled Tapestry Inc – Consumer Demand Heading into
Holiday Season. I’m Nyree Hinton and I’ll be facilitating today’s Interview with Mrs Sonali Vanjani, former
VP, Business Integration and Strategic Pricing at Tapestry Inc.
Sonali, before we get started with today’s Interview, please state I agree or I disagree to the following
statement: You understand the definition of material non-public information and agree not to disclose any
such information, or any other information which is confidential, during this Interview.
SV: I agree.
NH: Could you provide an introduction to your background and various roles you’ve held in the industry?
SV: I, basically, have been, prior to this last year, with Tapestry/Coach for 15 years, mostly with Coach. I have
a variety of experiences but most of my time there was dedicated to merchandising and planning across the
globe. I worked for North America, for China, our international wholesale division, as well as our global team,
so definitely had the merchandising and planning experience across many different business models within a
global company. Then in my last three years, I took on a centralised pricing role where I worked really closely
with merchants and planners to define our pricing strategy, and that’s when I took over and pulled up for
Tapestry. Not only was I doing that for Coach, I was doing that for Kate Spade and Stuart Weitzman, working
with our global teams to set the initial price architecture but then also translate that across the globe in the
many different currencies. Then in my last year there, I was still doing pricing but also took on an expanded
role to help with AI, data analytics, business integration, given my knowledge in operations in certain roles.
[00:02:33]
Q: How significant are the sourcing concerns for the luxury accessory category? There have been factory
shutdowns in footwear due to coronavirus and there are two-month delays, as well as cargo ships that are
docking for months at a time. Do you think the industry can supply this holiday season?
SV: It’s affecting everything. It’s almost affecting every industry but definitely retail has gotten hit hard again
with this. It’s not just something that affects Tapestry, it’s obviously across the board, that now that demand is
back and we’re understanding trends in a post-COVID world, I think it’s an extreme concern. Externally,
there’s a lot of missed sales opportunity and, internally, it’s putting a lot of pressure on internal teams to
change. I think it’s good for the long term. Everybody has to change the ways of working because it sounds like
this is going to be a challenge for the foreseeable future, it’s not going away any time soon.
I think two things. I’ll caveat that with two things. I do think there’s absolutely risk to holiday, potential
missed opportunities. Two things are driving that. One is as we’re seeing customers change the way they’re
shopping, with the world, in some places, opening up again. Being able to get back into stock as you’re reading
the trends is very difficult right now, so I think there’s a risk to holiday. That said, I think they know this is
going to be a concern. I think teams are smart. Especially at Tapestry, I think there are ways that they are
working, I’m sure, I haven’t been there for the last year, but ways that they are working to try to mitigate that
risk. They’re very good about preplanning and minimising any risk they see, whether it’s being agile and
nimble with certain factories to produce elsewhere where COVID isn’t an impact. I think it’s those two factors
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that they’re definitely changing the way they’re working and they’re trying to minimise the risk, but will there
be risk? Absolutely.
[00:05:42]
Q: What do you think about demand? You suggested that consumers are changing the way they’re shopping.
What might demand be like heading into this holiday season? It seems many brands or retailers are very up in
the air. There’s been a huge jump in consumer spending, built up because of the pandemic. Is this starting to
taper off or do you think consumers still have money that they’re willing to deploy?
SV: I think it’s still continuing. I think the positive uptick in terms of demand, now whether they can meet the
demand is a different story but I think the traction we’ve been seeing over the last few quarters continues. I
think people are trying to figure out, they’re still ironing out. Life is coming back, again, in certain areas, but
they are figuring out a way to live in this new environment and life goes on. From what I’ve been seeing, my
own perception, my own thoughts, and I’m a big consumer of goods, I think that uptick in demand will
continue. It’ll be for different things. I think there are still people working from home, there’s still that trend,
uptick in active, in comfort, etc, in home goods, etc, but there’s also a switch being pulled in the sense that
they’re shopping for different things that are maybe more occasion, etc, that we haven’t really seen when
COVID hit.
[00:07:48]
Q: Could you break down Tapestry’s revenue by category and how that’s changed in the post-pandemic
environment? Have you noticed any significant changes or shifts in the company’s core products? Has there
been a shift from women’s handbags to more share of women’s accessories, or to footwear and lifestyle
categories?
SV: If we take Coach, for example, and you can probably follow the same formula for Kate Spade, handbags
and accessories will always be their bread and butter. It always will be. That’s what they’re known for. It’ll still
be the volume share but has it been being shifted out of handbags into other lifestyle categories? Absolutely.
(1) I think COVID has impacted that, but (2) that’s also been a growth strategy. That’s been a product strategy
for the company even before COVID. It is to continue to maintain handbags but shift out into these other
categories that are more everyday, like accessories, tech accessories, like footwear. Footwear is huge, and
especially since they’ve pivoted to the whole trend is, and it’s still happening, with athleisure or sneakers.
There’s definitely been a shift into growing footwear and some of the smaller accessories category. I would say
things like jewellery and scarves are a little bit smaller. There might be a little bit of a shift but not as much of a
focus as categories like footwear, is a big one.
[00:10:09]
Q: How strong is Coach for Tapestry in some of the lifestyle categories or sub-categories? Could you break
down lifestyle itself? Is the company making athleisure-type wear, is it housing, bedding wear? How is
Tapestry positioned for this category?
SV: That’s a good question. I think that there are some internal workings. Footwear is a huge opportunity for
them. I think the challenge has always been, when I was there, for categories that they want to grow, like
ready-to-wear and footwear, what they’re seeing traction on is just there are handbags and smaller accessories
are where the high-margin product is. It’s just sizing in sneakers and ready-to-wear, the make of it, the
materials, it’s a little lower margin. I think as the business is growing with volume, with learning some best
practices from Stuart Weitzman on vendors and where to make it, and as the volume grows, I think those
things are getting better, but, in my opinion, I think that they’re always going to be lower-margin categories
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than in handbags. However, what can offset that are some of the smaller accessory categories. There is an
uptick in that world, and so if they can balance it out that way, I think that would be a way to maintain where
they’ve been.
[00:12:00]
Q: What do supply issues mean for pricing? How do big luxury players or affordable luxury players use pricing
as a tool when supply is short? Can they maximise the full value of the products on shelf, given the short
supply, or is there still some promotional aspect to it?
SV: To be honest, I think it’s a wait and see. I feel like we keep on swinging the pendulum, because we can’t
anticipate what’s coming next sometimes. Because, with COVID, I think there was a lot of promotional activity
happening up front, then they realised that the whole digital strategy and the pivot off of that, that there was
more willingness to pay on some of the product, and so there were price increases and pullback on
promotions, which the customer was okay with and so that strategy continues. I do think that’s a supply chain
issue, I just think it’s more of an issue of, like we said, we can’t fill the demand enough. I think that the
pullback on promotions will probably continue, unless it’s typical retail stuff where this is the product that
isn’t selling, given that shift in consumer behaviour, ie shopping for maybe more dress, going-out stuff than
they were doing before. I think that the promotional strategy, that would be swinging the pendulum too far, I
think, right now, and I think that because there’s the demand, that means that there is willingness to pay.
[00:14:16]
Q: Could you break down Tapestry’s strong growth throughout China? What brands are successful there vs
not? How sustainable might this growth be?
SV: I think it’s sustainable. China isn’t new. China has been there, it’s been an opportunity ever since 2008-
09, when they bought back the business, and as most luxury players were seeing the opportunity in China. It’s
been around. Their customer, Coach, in particular, there, I think Kate Spade and Stuart Weitzman certainly
have opportunity in China. The brand awareness is gaining some momentum but it’s still quite low. For Coach,
the brand awareness is there. It’s something they have built out. The Coach brand in China compared to the
US is considered much more luxe in terms of the perception, and so they think it’s a cool brand. There is brand
heat there. I think Coach has done an amazing job of keeping on-trend with what the customer wants,
especially in China. With data analytics capabilities, with the whole team built out there, I think that the
growth will continue. Will it be stellar double digits? I don’t know, but I think there is still continued
opportunity. Outside of the US, it’s the biggest market. They’re going to continue driving growth with
innovation. Like I said, I think Stuart Weitzman and Kate Spade still have some way to go. There’s opportunity
there but they need the brand awareness.
[00:16:40]
Q: What are some challenges in building brand awareness internationally or within China?
SV: I think it really is simple, it comes down to marketing and getting it out on social media, etc. I think there
is some undoing that needs to be done with how Kate Spade entered the market, as well as Stuart Weitzman.
They need to build out that brand awareness with their social media and things like that. It’s not a challenge,
they just need to focus on it and they need to hone in on the right price positioning. I think there’s been a lot of
up and down, “Kate Spade is too cheap. Should we bring it higher so there’s more perception?” There are a lot
of questions happening that they’re trying to answer around that. Even within Stuart Weitzman, is pricing too
high because they can get the same exact shoe at Gucci and some of these other players that are definitely
more elevated? They have to get their price positioning correct so that they drive demand for just some sort of
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heat, but it also comes down to marketing and positioning from a brand imaging perspective, which I think
they just have to get a little more right by understanding what the consumer wants from these brands.
[00:18:30]
Q: What is your assessment of Tapestry and its ability to manage different brands? Is there too much of a
focus on Coach? Is it not giving the right resources and attention to some of its sister brands? I know VF Corp
does a fantastic job of holding up its different brands such as North Face and others.
SV: I think they can do it. I think they have a little way to go though. I think, again, it’s been a change in
leadership a few times over the course of the last two years. There has been an idea that centralisation was the
way to go. However, it’s clear that all three brands are in different stages and that means that some
decentralisation needs to occur. There are some places where, maybe it’s with supply chain or whatever, that
can be centralised. I think they need to get that right. There’s no question to me that I think these brands can
succeed and Tapestry can be successful at managing this portfolio, if they let some pieces of the brand be run
more autonomously, if that makes sense.
[00:20:08]
Q: How did pricing work across Tapestry’s different brands? Was there a true differentiation in the way that
you managed your pricing strategy across different brands or regions, or did someone try to one-size-fits-all?
How do you consider international pricing strategy, given your exposure to it?
SV: I would say one thing they did really well is just from a brand positioning, again, mostly North America-
centric, they each had their own reason to be. Stuart Weitzman, it’s not super luxury but it’s not, and I know
this is an old term but that modern accessible luxury. It’s somewhere in between when you look at the
competitive space. Kate Spade is fun and quirky and very women-focused, and Coach is just cool New York. I
think that they’ve got that positioning down, which took a little to come to. I would say from a pricing
perspective, they have their positioning. I think it’s just where there’s more work that needs to be done, and I
think they’re getting there, because the first part is just the awareness of it, is how do you translate that across
the globe? I used that example of Coach. Coach has a certain type of customer base in the US. That’s changing,
where they’re gaining a younger customer, etc, but the perception is different in the US vs in Europe or in
China. The pricing strategy originally, when it was centralised, was taking an approach of, “This is the Coach
model and it worked for Coach, so let’s apply it,” but I don’t think that that works. I think they know it and I
think that there is more, like I said in the earlier question, decentralisation happening around that, where,
again, because the brands are in different stages across the globe, the pricing strategy needs to be much more
personalised for that.
[00:22:58]
Q: What are your thoughts on the stagnation in the men’s category for Tapestry? Has it really flat-lined in
terms of being innovative? How important is that to the company’s strategic vision? In retail in general,
women lead the categories and then companies try to make up for it later in men’s.
SV: I think that’s a good question. I know men’s was a huge opportunity and it was mostly in Asia at the time
that I was there. That’s where we were seeing a lot of the growth. North America was tough because of the way
that North America man shops, and what we found is that mostly women were buying gifts or they were
buying for themselves, they just liked the men’s product or they were buying it as a gift. I think men’s, they’re
trying to make it cool, etc. I do still think it’s a question mark in terms of how high is high or if this is where
we’ve come. I think that is the men’s, I think it’s reached its growth potential, but I don’t think that that’s a risk
to the company because I think, again, as you said, women really drive the spend and the demand. As long as
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they’re continuing to innovate within these other categories through collaborations or just do some fun and
exciting stuff, that’s what the customer is gravitating towards, I think they’ll continue to see growth.
[00:25:00]
Q: Tapestry has touted 900,000 new customer acquisitions through e-commerce channels. How sticky might
these customers be? Are they truly new customers or are they just shopping in a new channel?
SV: That’s a good question. I think they’re truly new customers. I actually think they’re truly new customers,
(1). (2) That wouldn’t define a new customer to the brand at all. I think they’re pretty savvy and accurate with
how they are tracking these new customers, and especially in an omni world that we live in today. How sticky
are they? I don’t know. I really don’t know. I think it’s a wait and see. I think it’s always tough with new
customers. You have to keep up, keep the innovation going, be trendy. The new customers are mostly younger
customers, and so they are shopping in different ways, they are driven by different things. There’s a lot more
out there these days, smaller companies, more D2C companies that stand for certain visions that are really
important to the younger generation. I don’t know. I think they’re going to have to really try hard to keep up.
[00:26:46]
Q: Can Tapestry revitalise the organisation domestically through an acquisition of a start-up D2C company?
SV: To be honest, I can’t really speak to that, I don’t know, but in my opinion I think that that would help. I
know that Tapestry didn’t come about just to be a family of three brands. There is more to the Tapestry story
ahead and to its future. I think that is a very good call. I think that would help them, I just don’t know when
they’ll be ready.
[00:27:49]
Q: It seems a lot of Tapestry’s sales are now D2C, with 10% being wholesale. How does that compare
historically to its distribution mix?
SV: I don’t remember the exact numbers but it was definitely not even much more. Again, I want to say just in
the last three years this has changed, or last two years this has changed, where it was maybe 80/20. Obviously,
before that D2C just kept on getting bigger and bigger. There used to be a North America wholesale focus a
decade ago, and then with the whole international wholesale, China used to be a distributor in 2008. That is
their strategy, to become more direct and to have more control over their brands. I think that’s just going to
continue. It seems to be working well for them and wholesale has been tough. I do think that maybe an
opportunity where wholesale might have more room, I don’t think it’s going to completely tip the ratio by
much but is having more online wholesale, just to have that presence out there.
[00:29:22]
Q: Tapestry seems to be taking a much more proactive step in building out its D2C approach for Coach and its
other brands and focusing on this distribution channel rather than wholesale. The big issue these days is other
brands under Capri or VF trying to segue away from wholesale. Although the majority of Tapestry’s revenues
come through D2C and not as much exposure to wholesale, why has it not performed as well as brands who
were overexposed to wholesale? Could you expand on the peer group gap Tapestry has with VF, Capri, Estée
Lauder or Ralph Lauren?
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SV: I think that there are a few other things going on. Yes, they’re less in wholesale, more in D2C. I think there
is a resurgence of the brands. To be honest, Kate Spade has opportunity but Coach is really driving the ship
here for these brands. When you compare it to Capri, I know Michael Kors is on a resurgence as well but trying
to pull back from promotions, but they have Versace and Jimmy Choo that are doing well and there’s a lot of
opportunity. I don’t think the success is necessarily based on the mix of wholesale and D2C. I think the success
is really based on brand heat, more than anything.
[00:31:31]
Q: Would Tapestry benefit from pushing its product through wholesale at a much bigger clip? If you were to
compare Coach and Michael Kors to the consumer, many would maybe think of them as the same in terms of
brand affinity.
SV: I think you do really bring up a good point. I think there could be opportunity and I think we have to think
about wholesale in a different way than how we have thought about it before, like Macy’s and you have a shop
in shop or whatever. I know Coach and Tapestry, they want to be innovative, they want to meet the customers
where they’re shopping these days, so that’s why I was pointing to the fact of maybe what would serve them is
looking to be in wholesale but more digitally only.
[00:32:42]
Q: How would you compare Tapestry to other players in the market in terms of really knowing their customer
and then jumping over to some of that predictive analysis that you were referring to in some of your models?
SV: I was there at a time when the pivot was just happening, but what I can say is that 100%, they had to
change the ways of working to be more customer-centric, and it was a goal. It was on everybody’s goal. It was
customer-centricity and then the way we get there is through technology and data analytics. That’s where the
growth is in terms of the teams and the focus. Building out predictive capabilities on price sensitivity to help
maximise margin and revenue, all of that stuff is happening, and understanding door profiles and really
honing on the customer, and we all hear this word about customer segmentation, but doing it in the right way.
I think that they have really put a lot of investment around this over the last year and a half, I want to say, and
so we’re probably starting to see there’s still more runway ahead to actually see the impact of that.
[00:34:38]
Q: How does Tapestry consider consumer profile and analysis and pricing strategy across the different
brands? Is it properly tracking the consumer across Kate Spade in the same way it does with Coach, or is there
some difference in data quality, reliability or overall amount of metrics and data?
SV: I would say I think that they’ve gotten in a good place, definitely for Coach, because they probably have
the most vast amount of data and the most sophisticated. Kate Spade is probably there now, by this point. I
don’t know about Stuart Weitzman. I think that was always a question. Hopefully, they’ve gotten better with
that. In terms of customer segmentation and connecting that to price and willingness to pay and price
sensitivity, I think that they have gotten to a good place for Coach and Kate Spade. That is probably one of the
factors that defines what a customer segment is, is their willingness to pay, not just product preferences. That
is probably a product preference. They don’t have a lot of price sensitivity. Do you see the same velocity with
this customer group when we have a promotion vs not having a promotion? If not, then they’re not that price-
sensitive and there’s a willingness to pay more. If you see a big uptick in unit velocity when we do have a
promotion, that means that they’re pretty price-sensitive. That’s just a small subset of an example of things
that are looked at to define and make pricing decisions off of.
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NH: How do those factors change as you jump into a market such as China? How does the accuracy in some of
this analysis change there given there is a lot of data and a population that’s much more geared toward digital
transactions? Did you notice any differences there?
SV: No, I didn’t, honestly. I think the focus was always North America because the data was readily available,
but no, China, I think because of how big it has become, the two biggest focuses, I want to say, were North
America and China, and the data was pretty good.
[00:37:44]
Q: What other brands do you think are leveraging the insights and analysis better than Tapestry?
SV: I can only think of one. I want to say the whole Nike family, obviously. That could be an interesting play
for Tapestry, them acquiring, I want to say it was probably a few years ago, an AI company. Obviously, we
know Amazon is the star in all of this, but I want to say one company to look at for that is Nike. That could be
an opportunity for Tapestry. I know Gap recently acquired an AI company to help some things, so I just feel
like maybe that’s another angle they could go.
[00:38:49]
Q: To what extent can Tapestry innovate, particularly in the lifestyle segment? Is there true innovation going
on here or is it a replenishment of last year’s styles in different colours and formats? How innovative is Coach
or other brands under Tapestry?
SV: I think it’s a whole movement, honestly. What I mean by that is still designing good-quality, customer-
preferred types of styles that resonate with the customers and the brand positioning, but I think that there’s
this whole movement around sustainability everywhere. That innovation is just thinking about something new
that the customer would gravitate towards. That feels like the next avenue for them, which I know that also
has been a focus, is just, “How do we make our products better for the planet?” I think that that’s partly
innovation too. I think that there’s something there for them that they can tap into, to continue to innovate
while still, I want to say, I know it’s a catch-all but while still holding true to what Coach is, that nostalgia
around Coach. I remember going into a store, I don’t know, maybe two months ago and talking to a store
associate there, and they were saying the brand is hot again. It’s on social media, it’s on TikTok. People are
coming in for these certain styles, they’re getting sold out, but then also we have customers that got their first
Coach handbag when they were in high school, and those vintage styles, they’re recreating. That’s innovation
too. They’re pulling from the archives. They’re getting new customers through social media but then also
holding onto some of the nostalgic older customers that remember Coach a certain way and it’s a legacy
passing it down to their family. I just thought that was an interesting conversation that I had with the store
associate there, that they’re seeing all types of different customers. It’s become much more it appeals to
different customer groups.
[00:41:51]
Q: You’ve been at Coach through its different ups and downs. Could you speak to that loss of the customer and
how challenging it is to regain? You have that customer who hasn’t bought since high school or elementary or
middle school, but they’re older now. Why would they buy Coach vs brands such as Ferragamo, or something
in Nordstrom? At what point do you realise your brand is failing?
SV: I think that happened with Coach and I think it happened with Kate Spade. Coach definitely has come out
of it the last few years, but that was a really hard thing to go through. I don’t remember the dates but around
2014-17, the new creative director started, Stuart, he had this vision of elevating the brand and, through that,
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lost some of our core customers. They were very price-sensitive, they shopped a lot of the outlets, but they
really gravitated to some of those core styles, and so it was really, really hard. It took years to gain and it took a
lot of pivoting on brand positioning. I want to say that we started seeing the heat again in 2019, and then
COVID happened, but anyways, it took about five years to get it back. I think Kate Spade is going through the
same story, where they tried to elevate the brand 2-3 years ago. Definitely alienated their core customers. They
realised it. They’re now trying to pivot back while still forging ahead to the future of what the Kate Spade
brand means. It’s a balance.
[00:44:29]
Q: You mentioned the alienation of the customer. Can the company tell where they’re shifting to?
SV: I think now they can probably tell, but I think at the time they were just seeing sales drop off and seeing
sales pick up somewhere else and you were making assumptions in addition to actually doing set focus groups,
etc, to get an understanding of where they were going and what they were looking for.
[00:45:22]
Q: What does sustainability mean in this industry and how resilient are some apparel companies in their
sustainability practices? Companies want to make sure that what they’re posting is really beneficial to the
supply chain as a whole. Just because the cotton or knit is sourced in a different country doesn’t mean the
people in that factory are still not underpaid significantly. What is the risk to some of these sustainability
goals? Are they actually real goals?
SV: They are real goals. They’ve been goals for years and so I know that they’re getting better. They’re not, for
lack of a better word, making stuff up. They have whole teams dedicated to this now They know how important
it is. They know how important it is for the world that we live in, for each and every one of us, but also the
customer, so just like they are putting a lot of investment into data analytics, they’re putting a lot of
investment into this. I do believe that, if we’re speaking about Tapestry, they’re being very diligent about the
process.
[00:47:03]
Q: What styling preferences or sub-categories do you think will perform well this holiday season? You
mentioned that as the pandemic went on, people stayed in and athleisure and ready-to-wear were probably
performing better. As we enter the holiday season, however, people are going out more and moving past
coronavirus.
SV: We’re not going to go back to super, maybe some people are but super dressed up and very structured.
That’s not the world we live in today. I think there’s going to be some in-between of the comfort that
everybody gravitated towards in the beginning of COVID to just effortless chic, is the way I would say it. It’s
accessible, it’s easy, it goes with everything. I’ve been looking at some of the handbags that they have across
Kate Spade and Coach. I do think that that resonates when you think about making it easy for a customer.
How does that translate into a handbag? Having something that’s hands-free, like a cross-body, but still
making it not super casual but maybe a little more chic, where you can take it from day to night, so it’s making
it super easy for the customer, they don’t need to switch out bags and things like that, as an example. I want to
say even sneakers are sneakers but they’re making their sneakers cool, with something unexpected. I think
we’re going to see still casual wear is here but I think more amped up, if that makes sense.
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[00:49:21]
Q: You mentioned the struggles around Stuart Weitzman and Kate Spade. Could you properly define those
brands? How are they differentiated? Are they properly messaging that differentiation to the consumer? We
think Nike, we think at functional performance. We think Lululemon, we think quality athleisure.
SV: I think Kate Spade is in a good place, honestly. I think they’re probably just at the beginning of their pivot
of their brand positioning and getting it right. I think they’re in a good place. They’re an accessible price for
the most part. They read fun, quirky, independent. They’re very women-focused and inclusivity. I think that
they’ve got that. I don’t feel like I’m that equipped to speak but I don’t know about Stuart Weitzman. Just as a
consumer, I spent a lot of time on pricing when we were trying to get the brand positioning right, and
obviously it was pre-COVID, so it was a place where they had their iconic sandals and heels and pumps, and
that’s not the world we live in today really, as much. I think there’s some work to do on that positioning, in my
opinion.
[00:51:13]
Q: What is Coach’s ability to expand throughout apparel, from intimate apparel to leisurewear? Has Coach
built a presence in this aspect? If not, why?
SV: I think it’s a great question. I also am curious. Their assortment, there’s a lot of branding. They have a
bunch of T-shirts and sweatshirts. I think maybe there’s some more work to be done before they start building
it out on brand awareness around ready-to-wear. I’m not sure that people are coming to Coach to buy T-shirts,
unless they’re just there and it’s an add-on. They’re quite expensive compared to what else you can get out
there. I think it’s a very valid question. I think footwear is a bigger opportunity. I have a question mark on
ready-to-wear right now, but I think they probably have to get the brand awareness out and the price
positioning more in line with maybe where the competitors are because it is on the more expensive side. I
think then, once they figure that out, maybe there is room to expand into what you’re saying. I don’t know that
they’ll ever go into intimates, but something like more activewear, so to speak, like sweatpants and sweatshirts
and matchbacks and things like that, more easy dressing.
[00:53:10]
Q: What are your expectations for ad spend and the ad profile of Tapestry or Coach this holiday season? How
significantly are they spending on new customers to drive traffic? Is there a point where you spend so much
the value is not there?
SV: I wasn’t really part of that group. I can’t really speak to it, but I will say the one thing I know about Coach
is everything is measured. Everything is very data-heavy. While they’ve become more agile, they’re constantly
looking at KPIs. I don’t think they would be doing things like that without measuring it and understanding the
success rate, if that helps.
[00:54:17]
Q: What do investors commonly overlook when considering the competitiveness of Tapestry, its brands or
overall weaknesses? Is there anything top of mind to you?
SV: No. I think one thing, I’ve been asked this question before and previously I would talk to I think
something that’s overlooked is how are they leveraging data analytics, etc, it’s all about the pivot to digital, but
I think people are talking about that a lot more these days, so I think they’re focusing on the right things.
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[00:55:03]
NH: Thanks, Sonali. We will now end the Interview. Let me close by saying thank you, again, for your time
today. We were able to cover an extensive amount. Thank you, clients, for joining Third Bridge Forum’s
Interview. If you would like to arrange a private meeting or consultation, please contact your relationship
manager. Have a good one.
SV: Thank you so much.
Transcription ends at 00:55:16 of the recorded material
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