From Zero to $8 Billion: How Tapestry Built a Fashion Empire

SUMMARY

• Tapestry, Inc. Global House of Brands; Coach, Kate Spade and Stuart Weitzman are positioned around innovation, authenticity, and sustainability.
• Revenue (2023): $6.66 billion, with Coach contributing 74.5%, Kate Spade 21.3%, and Stuart Weitzman 4.2%.
• Market Size: US Accessories and Apparel Market is approximately more than $400 billion each year with which Tapestry presents well, alongside competitors.
• Competitors The companies competing in the affordable and luxury segments are Capri Holdings (Versace, Michael Kors) and LVMH.

The Rise of $15 Billion Tapestry Brand: How Luxury Brands are Shaping the Future of Fashion

The U.S. accessories and apparel market is over $400 billion annually. The U.S. luxury accessories market includes around $75 billion worth in 2023 with growth at 4-6% annual rate, such as handbags, footwear, and small leather goods. Tapestry constitutes an important portion of the US-based luxury goods market share; it focuses on diversified portfolios along with innovation, sustainability, and customer-centric strategies. Tapestry Inc. has reported $6.8 billion in total revenue for the fiscal year ended June 2024 for its three iconic brands: Coach, Kate Spade, and Stuart Weitzman. Tapestry is projected to command a market share of 10.7%. The other rival brands in the US market are Michael Kors owned by Capri Holdings, Ralph Lauren, and LVMH.

Tapestry, Inc. is a global house of fashion brands. The three operating units that operate the business:

Coach

• Total net sales revenue contribution for the year 2023- 74.5 % of total net sales from total revenue, $5.1 billion 

• A luxury brand popularized by its handbags and ready-to-wear footwear. It also sells accessories.

• The company has 939 stores worldwide, which includes 330 in North America and 609 internationally.

• It is well-known for its iconic craftsmanship and digital presence.

Kate Spade New York

• Revenue Contribution (2023): 21.3% of total net sales, which translates to $1.4 billion, comes from total revenue.

• Handbags, clothing, and accessories revolve around young and dynamic minds.

• Operates e-commerce websites and retail stores worldwide.

Stuart Weitzman

• Revenue Contribution (2023): 4.2 percent of total net sales amounting to $300 million from total revenue.

• High-end shoes that focus on innovation and luxury.

• It runs a hybrid model of e-commerce platforms, standalone stores and also through wholesale partnerships.

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How It All Began

Coach originated as a family company in Manhattan that manufactured leather goods, placing high regard on quality and durability. After decades, the company shifted from a niche leather workshop into a global leader of luxury, with its strong underpinning through key leadership on lifestyle branding.

Tapestry's acquisition strategy was pivotal:

Stuart Weitzman: Acquired for $574 million in 2015, to Tapestry strengthen its luxury footprint in footwear.

Kate Spade (2017): Acquired for $2.4 billion, furthering brand portfolio diversification in modern and youthful appeal.

Renaming to Tapestry in 2017 marked its move towards becoming a global house of luxury, consolidating all the brands under a common vision of accessible luxury and lifestyle innovation.

Global headwinds notwithstanding, Tapestry achieved outstanding financial performance in the fiscal year 2023 by registering:

• Cash flow at a level of $1.1 billion.

• Adjusted EPS of $4.29 reflects effective cost management and operating efficiency.

• International markets exhibited significant growth with increased revenues in Europe (+14%), Other Asia (+9%), and Greater China (+3%).

"We believed that luxury shouldn’t just be about exclusivity but about quality and utility. That vision carried us forward." by Tapestry's Founder Miles Cahn

Unique approach by Tapestry Founder

Tapestry, Inc. has been responding to rivalry within the luxury market that constantly transforms by taking an omni-directional approach.

1. Digital Transformation

Tapestry has heavily invested into the digital capabilities to strengthening the e-commerce and customers connections:

• Personalized Shoppings: Using artificial intelligence and data analytics ensure relevant recommendations and shopping moments

• Omnichannel Experience: Integrate online and physical, including BOPIS along with virtual try-on innovations.

• Direct-to-Consumer Sales: All three brands e-commerce platforms should be scaled-up to capture higher margins, as well as better knowledge of customer data.

2. Geographic Expansion

• North America: Lead in US while focusing on under-addressed demographics

• Asia Pacific: Growth opportunity in China and Japan with continued acceleration in luxury spend

• Europe and Emerging Markets: Expand in-store network and e-commerce network to leverage new geographies

3. Sustainability Initiatives

The luxury market is becoming more sustainable. Some of the efforts by Tapestry are:

• Use of eco-friendly materials: Recycled and sustainable materials in products, mainly within Coach's leather goods.

• Practices of circular economy: Initiating Coach (Re)Loved to promote upcycling and resale

• Transparency: Being devoted to ESG goals for socially conscious consumers.

4. Competitive Pricing and Accessibility

Contrasted to traditional high-end luxury houses, such as Louis Vuitton or Chanel, Tapestry brands keep on with an "accessible luxury" positioning:

• Competitively price positions allow aspirational consumer purchase a luxury experience at manageable levels.

• Organic collaborations and limited-time lines improve exclusivity and the desirable quality of the brand.

Future Trends!

Tapestry aims for more than $8 billion in revenue going forward through improved operating efficiency, international market access, and new product offerings that better meet changing consumer needs. The brand's sustainability efforts are in harmony with global consumer trends.

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