Tapestry CEO: Why people are buying handbags during lockdown
Taking Tapestry’s (TPR) operations down the studs and listening to consumer data is paying early dividends for new CEO Joanne Crevoiserat.
Shares of the owner of Coach, Kate Spade and Stuart Weitzman popped more than 4% in Thursday trading as the company showed across the board early progress under Crevoiserat, who got her interim CEO label removed earlier this week. While fiscal first quarter sales declined at all three brands in large part because of COVID-19 weighing on mall traffic, operating profits improved markedly at each brand versus a year ago.
Tapestry’s quarter comes as some analysts on Wall Street have called attention to improved demand trends for handbags of late. The fact it’s occurring ahead of the crucial holiday season — and despite spending uncertainty due to the pandemic and the election — is not lost on Crevoiserat. The former Abercrombie & Fitch executive points out October has “started well.”
“As we talk to consumers what we hear from them is, you know they they have high purchase intent for the category,” says Crevoiserat. “The handbag purchase is an emotional one, and certainly in a period of disruption, they look at a handbag purchase or purchasing small leather goods as a real treat. So they're buying for themselves. They have an emotional attachment to our brands and the product. And that's what's driving the business.”
Both Coach and Kate Spade were profitable, while the long struggling Stuart Weitzman broke even. None of that is a small achievement considering Tapestry’s net sales dropped 14% in the quarter.
E-commerce sales surged by triple digits, Tapestry said.
Here’s how Tapestry performed compared to Wall Street estimates:
Net sales: $1.17 billion versus estimates for $1.04 billion
Adjusted diluted EPS: $0.58 versus estimates for $0.19
Crevoiserat has moved quickly to cut costs via store closures and corporate headcount reductions. She has also sharpened how new accessories are brought to market — doing so has helped keep inventory under control and margins solid.
In total, the company expects to realize $300 million in cost savings from its recent restructuring efforts — some $200 million is seen being achieved in the current fiscal year.
“It’s very intentional,” Crevoiserat tells Yahoo Finance of the profit improvement.
Provided the election outcome doesn’t derail the psyche of consumers this holiday season, the accessories category may be a surprise winner as folks shop for themselves. And Tapestry could be a winner, too, because of Crevoiserat’s work to rebuild the brand from the ground floor.
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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