Tapestry Targets $10B for Coach in Bold Handbag Market Expansion

Updated 3:04 p.m. ET Sept. 10

Joanne Crevoiserat might have had to turn to Plan B for Tapestry Inc. after the $8.5 billion acquisition of Capri Holdings fell through — but the chief executive officer hasn’t lost her ambition.

Crevoiserat is looking at the global handbag opportunity anew, defining the total addressable market not by how many people bought bags last year, but how many people could have. 

“That is giving us an opportunity to expand our brand reach across geographies and generations,” Crevoiserat told WWD in an interview.

The new target audience is mammoth — Tapestry puts it at 1.9 billion people in markets where the Coach and Kate Spade brands currently hold a collective market share of 0.6 percent. 

By the company’s way of thinking, that new take on the consumer unlocks an opportunity to grow by 10-times down the line. 

“We’re winning with a new generation of consumers, particularly with the momentum we’re seeing in the Coach brand,” Crevoiserat said. “And we’re doing that because we’re not thinking about the market in maybe traditional terms.”

Crevoiserat will define the new market and lay out the company’s three-year strategic plan at an investor meeting Wednesday. Dubbed Amplify, the new plan aims to: 

To hit those targets, the plan leans on familiar elements, including strong emotional connections with consumers, fashion innovation and compelling experiences. Tapestry is also looking to “Amplify the power of our people: Future-proofing our growth by continuing to drive a consumer-obsessed culture that is agile and always looking forward.” 

“This is a proven playbook,” Crevoiserat said. “We have a strong foundation today and we’re delivering unbeatable value and we’ve created a lot of value for our shareholders.”

Tapestry is among the most highly valued of the American fashion and retail companies with a market capitalization of $21.9 billion.

“Through our Amplify agenda, it is really amplifying from a place of strength where we’ll reach more consumers, we’ll have more sustainable growth and more value creation for our shareholders,” the CEO said.

Much of that value is expected to come from younger shoppers coming into the Coach brand. 

“If you look at the number of women turning 18 every year for the next 10 years, there are 25 million people globally in the markets where we already do business,” Crevoiserat said. “Why is that significant? Because that’s when a woman may be graduating from high school and moving to college, leaving her backpack at home and wanting to buy a handbag.

“We want to capture this consumer as she enters the market,” she said. “This gives us a powerful opportunity to expand the market as well as our share, but also to build that brand love that’s fostered for a lifetime from that first purchase and obviously gives us an opportunity to build lifetime value.”

Todd Kahn, CEO and brand president at Coach, said the brand is looking to — to some degree — repeat history.

“This isn’t a theoretical idea,” Kahn said. “At our best Coach did this before, we expanded the market. When Coach launched accessible luxury 20 years ago, that’s what they did. We brought new people into the category.”

At the investor meeting, Sandeep Seth, chief growth officer and president, said the exercise of redefining the target market opens the company’s brands to focus specifically on consumer opportunities, like women just getting out of school. 

“As we increase the consumer participation in the market, we see exponential opportunity as we open up the aperture,” Seth said. “For Coach, the Boomers and the Gen X [shoppers] who bought Coach in their teens continued to stay loyal with the brand forever. This is not just happening because of the price points we offer. It is because of the brand that drives desirability and brand love that stays forever.”

Connecting with shoppers early also helps the company unlock “the highest lifetime value.”

TD Cowen analyst Oliver Chen, who already rated the Tapestry stock a Buy, said the investor day’s theme of amplification “implies scaling what’s working and building on strengths to power growth with a focus on the two iconic brands.”

“We like the focus on timelessness and inclusivity as well as the prudent understanding that discounting can drive customer de-selection of the brand,” Chen said. “We believe the Coach brand needs to keep doing what it’s doing and reinvest success with margins to drive growth through demand creation and innovation to stay culturally relevant.”

Chen described Kate Spade as an interesting work in progress and gave a thumbs up to CEO and brand president Eva Erdmann’s plans to keep the brand’s wit. 

“Kate Spade has high awareness but needs greater brand heat and new icons,” he said. “The company will need to balance marketing spend vs. fixed cost leverage to achieve 22 percent operating margins.” 

Erdmann, who joined the brand 10 months ago from L’Oréal, is working to get Kate Spade back to its roots.

“We are not talking about fixing a broken brand today,” Erdmann said. “We are talking about unlocking and underused assets that millions of consumer already know and like, but don’t always choose first today.”

Erdmann said the brand was losing customers at the point of sale. 

“She tells us that the offer that she sees is confusing, overwhelming and, most importantly, not relevant enough,” she said. “So that gap between knowing us and buying us is our single biggest growth lever. And that’s why becoming top of mind and truly relevant is the unlock, not with a scattershot [approach], but with disciplined, cohesive brand expression, with a strong product storytelling and the flawless execution.”

That would put Kate Spade more inline with Coach and — if the company can get both brands working at the same time — it really will be a powerhouse.