00:00What a punishment for tapestry and it's beaten many metrics, Romain.
00:03Yeah, this is kind of like the curse of high expectations.
00:05I mean, this is a company that should be running on all cylinders.
00:09And when I say company, I'm going to put a big asterisk there
00:11because this is basically Coach and Kate Spade.
00:14But when you look at the revenue and you look at where the growth is,
00:17they might as well change the name of this company to Coach.
00:19They basically have $1.9 billion in net sales in the most recent quarter,
00:23$1.6 billion of that came from Coach alone.
00:26That is the growth story and it has been the growth story for a while.
00:30It's running in the double digits.
00:31It continues to run into the double digits.
00:33But there's this concern that that's going to start to normalize.
00:36They gave a revenue forecast for the full fiscal year,
00:38the fiscal year that just started in July.
00:41It was basically in line with estimates.
00:42And we know in this environment right now, in line is not enough for most investors,
00:47particularly for a stock that, let's not forget,
00:49had run up about 20% heading into this print.
00:52Stuart Weitzman used to be under the aegis of this company.
00:54It is no longer now.
00:56You look at Kate Spade, new creative director in place.
00:58What does this company say about the prospects of turning around that other side of this business?
01:01Well, I've interviewed the CEO in the past quarters about this,
01:05and they've talked a lot about how the reinvigoration of Coach.
01:07Because remember, Coach had kind of lost his mojo for a while,
01:09and it's back in a big way.
01:11And it was very deliberate.
01:12They really focused on Gen Z.
01:13They really focused on affordable luxury,
01:15finding that kind of little, that point kind of just below kind of the LVMH-type brands,
01:19but above kind of those mid-level ones that you see everywhere.
01:22They got rid of, they really improved their inventory situation, and Coach took off.
01:27So my question was always, can you apply that playbook to Kate Spade?
01:30And they were pretty confident they could.
01:32I think I asked that question probably, you know, maybe six, nine months ago.
01:36There's still a lot of questions as to when we actually start to see that playbook roll out
01:39and actually start to take effect.
01:40I remember that interview, and I remember how optimistic it was.
01:43It was a great interview.
01:46That said, what is the consumer that they're targeting here?
01:49I like to think of it as maybe the consumer in the crook of the K, right?
01:52Because it's not the consumer that's at the high end of the K.
01:55That's probably a good way to define it.
01:56I mean, they'll tell you, look, they want a kind of higher-end Gen Z type of consumer.
02:01That's what they're going for.
02:02And when you look at the price point, and they've been very clear about holding the price point.
02:06I mean, their bags kind of top out around $1,000, but there are several you can kind of get
02:09in that mid-$500 range.
02:11And they've been very clear that they want to kind of stay in that kind of price point,
02:15meaning not go too far above it and sort of press their luck because they feel like this is kind
02:18of the sweet spot
02:19where you can get sort of younger people who maybe don't have a lot of disposable income
02:24but are willing to splurge, and then as those younger people age and their income levels go up,
02:28they'll still be loyal to the coach brand.
02:31And noting how far it's fallen here over the course of the trading day down 15%.
02:34Look, the company expecting to buy back $1.35 billion in stock,
02:37improving a 16% increase to the dividend.
02:39And what does that tell you just about the stock directionally?
02:42Well, I mean, we should point out, I mean, their EPS is good, but a lot of the EPS, particularly
02:46with their EPS forecast,
02:47is kind of that buyback.
02:49I mean, you strip out that buyback, and the EPS growth looks a lot worse.
02:52And that's a big part of the concern as well.
02:54They've done a good job in holding margins.
02:55And Joanne Corvosa, the CEO, she's talked a lot about cost discipline
02:59and something they're very clear about doing.
03:01And investors have rewarded them for that.
03:02And again, when you look at them stacked up against other publicly traded retail fashion companies,
03:08they're still doing well.
03:09But you see the reaction there in the shares today.
03:12I mean, this is setting up to probably be the worst day that they've had,
03:14at least going back to actually about a year ago when they reported earnings,
03:18and the earnings got hit because of a Trump terrorist.
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