00:00Tapestry. It's had a meteoric rise in the last year and a major part of what's propelling the stock higher
00:05is the strength of one of its two brands, Coach.
00:09This morning, Katie and I got to catch up with Todd Kahn, the CEO and brand president of Coach, to
00:14discuss how they're managing tariffs,
00:16their focus on the Gen Z customer base, and what comes next after this phenomenal growth. Take a listen.
00:24We focus very much on trying to figure out Gen Z. I often say we're an overnight success story six
00:31years in the making.
00:32And Stuart and I, many years ago, recognized, among other people at Coach as well, that we were too much
00:41often considered a brand for everyone and hence a brand for no one.
00:45And we became extraordinarily focused on Gen Z. And part of our focus was listening, learning, doing a lot of
00:55sometimes what I call big data and little data.
00:58Big data is we're a direct-to-consumer business. We have millions of customers. We have a lot of data
01:04from them.
01:05Little data is sometimes going into people's houses, doing shop-alongs with them.
01:09They don't often know what brand, which brand they're speaking with and listening to them.
01:15And we gain real insight from them. And so what I often say is, I don't want to supplant the
01:22gut of our creatives.
01:24I just want to create an informed gut. So that's what we're doing. And that's what you're seeing working.
01:30How much of it is being that tastemaker, trying to anticipate where the trends are going to go versus, you
01:36know,
01:36following the logic, following the data and seeing what is resonating with Gen Z, for example?
01:43Yeah. So what we do, again, Lou said it, we have to remain curious.
01:48Also, what I often talk about, we have to remain humble. We don't have all the answers.
01:53We have a sense of where fashion is going. We pick up cues.
01:57Our creatives, our designers, our merchants are shopping the streets of Shanghai, of Tokyo, of New York, of L.A.,
02:07and seeing and listening to trends.
02:10We are not just following trends.
02:13If you're just in the following trend business, you're not really a significant fashion house.
02:20So we're listening to what they like.
02:22We understand there's functional needs, and Coach, I will say, in our 85-year history, excel at having an incredibly
02:32high-functioning bag.
02:33But what draws you to our category, no one needs our category.
02:38You can carry your stuff in a paper bag. You can carry your stuff in a $50,000 bag.
02:44Of course, there's material differences, but ultimately, it's an emotional purchase.
02:49We want to make sure our bags talk to the person, connect emotionally with them, and that's what we do.
02:59I think when we do it well, we're doing it our best.
03:02Well, you mentioned that global perspective, and I do want to bring that back to the conversation around Gen Z,
03:09since that's a nut that many are trying to crack.
03:12You think about Gen Z, and it seems like looking at their shopping trends, that it's much more about items.
03:17They're more comfortable buying luxury, buying affordable luxury, whereas millennials, which is my generation,
03:23it was much more, and it still is about experiences, travel, for example, comes at a premium.
03:29But the American Gen Z shopper, does that profile apply around the world as well?
03:36So it's interesting.
03:38Something we've learned about Gen Z.
03:39First, they're the most connected generation in history.
03:42The influences somebody sees in Seoul, in Shanghai, or New York are similar.
03:50If you think about some of the number one music or movies, they're similar across all geographies.
03:59And because we're all so connected socially, their likes and dislikes are often very similar.
04:05Now, many Gen Z will tell you they love experiences just as much as you love experiences.
04:09The difference, I think, is they're very, very thoughtful about their purchases.
04:17And sometimes people talk to me a lot about, wow, people are shopping in the real world again,
04:23and they're going to malls again.
04:25Malls are alive and thriving.
04:29Why is that?
04:30And one of the reasons, I think, because maybe during some very formidable years,
04:35Gen Z, because of COVID, we're shut in.
04:38So they're very much engaging in real-life experiences and community experiences.
04:46Shopping is a social event.
04:50Today, you'll come into a coach store.
04:53You'll see Gen Z shop.
04:55They'll be with their friends, or they'll quickly be on their phone showing their friends the bag they want.
05:01Mostly, they've already come in with a great understanding of what it is they want.
05:06Have you ran into any issues as of late with regard to being able to source your leather,
05:11whether it's because of tariffs or the cattle shortage we hear about,
05:14or even just the idea that the people, the expertise in being able to tan leather is the number of
05:19people who can do that these days.
05:20It's a lot different than what it was when you guys were founded in 1941.
05:23Yeah, so fortunately, we're a substantial house, and we have deep resources.
05:29We started as a manufacturer, so we still have a manufacturer mindset.
05:33We have leather experts in our company.
05:36We source leather from around the world.
05:39We work with the best tanneries.
05:41Our units are significant, so people want to work with us.
05:45So we do get the choice to get what's the best out there.
05:52We have not seen an issue with our leather suppliers, nor have we seen an issue with our make manufacturers.
06:00We are making coach product with some of the same people we've made for 20 or 30 years.
06:06We have very deep relations.
06:08Of course, tariffs are an issue.
06:09But one thing about our company that you need to bear in mind, we see in the next three years
06:1570% of our growth coming from international.
06:17So when I'm selling internationally, tariffs are no longer in play.
06:25And our thanks, of course, to Todd Kahn.
06:27He is the CEO and brand president of Coach.
06:29A really interesting conversation on how you revitalize a brand and keep that momentum going.
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