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Kate Spade and Stuart Weitzman Are Struggling a Bit Under Tapestry, Inc.

And at Coach, look out for another Selena Gomez collaboration.
Photo: @katespadeny/Instagram

Photo: @katespadeny/Instagram

Just in case you haven't gotten used to the name Tapestry, Inc. yet and need a refresher, it's the company formerly known as Coach, Inc., which underwent a rebrand last fall to better reflect that it had become a conglomerate of brands: Coach, Stuart Weitzman and, most recently, Kate Spade. And on Tuesday, a third-quarter earnings report revealed some struggles.

At Kate Spade, same-store sales were down 9 percent. The company blamed its intentional pullback from wholesale and flash sales, as well as a decline in global e-commerce. The pullback is part of a strategy similar to the one executed at Coach. By both reducing promotional activity and pulling out of department stores where promotional activity tends to be rampant, it hopes to remedy any brand dilution that might have taken place and train shoppers to pay full price for the brand.

At Stuart Weitzman, there have been "execution issues including production delays and lower sell-through of key carryover styles, which pressured sales and margins," according to a statement from Tapestry CEO Victor Luis. 

The name is not the only major change the company's made over the past year. After successfully orchestrating Coach's turnaround, the company has turned its attention toward the other brands. In February, Stuart Weitzman made its New York Fashion Week debut with a new creative director, Giovanni Morelli, and just last month, the footwear brand brought on a new CEO, Eraldo Poletto, from Ferragamo.

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Over at Kate Spade, longtime creative director Deborah Lloyd left the company in November following the acquisition; she was replaced by Nicola Glass, and in March, Tapestry brought on Anna Bakst as CEO.

Clearly, those brands are still finding their footing, and it seems to have made investors nervous. According to Bloomberg, Tapestry shares plummeted 13 percent Tuesday morning.

Meanwhile, at Coach, comparable sales rose 3 percent. As a company, Tapestry's net sales rose 33 percent, which is largely thanks to the Kate Spade acquisition — meaning it includes sales from a company that hadn't yet been acquired this time last year. Tapestry said it expects fiscal 2018 revenue to be up about 30 percent, with Kate Spade adding more than $1.2 billion in sales.

As for what else is next, Luis once again praised Coach collaborator and model Selena Gomez, whose collection for the brand will be expanded for fall and will include ready-to-wear. But Luis is hopeful about the other brands, too. "At Kate Spade, while our near-term priority remains integration and executing the strategic initiatives in place, we look forward to fueling growth in the years ahead through Nicola's fresh, new creative direction and Anna's extensive category experience," he said in his statement. "Similarly, we believe in Stuart Weitzman's potential, as we evolve the product assortment, infusing it with Giovanni's modern design aesthetic, while strengthening the brand's infrastructure under Eraldo's leadership."

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