Tapestry takes an $ 855 million writing on Kate Spade and has a serious doubt about her strategy to transform underperformative brands

It turns out that Tapestry cannot even run a brand acquired that she has had for years, long before Capri News was announced in 2023. Tapestry said Thursday that he had taken a reduction of $ 855 million on Kate Spade largely due to a drop in expected and future cash flows as well as investments that the company is doing.

However, the company continues to claim Kate Spade, where sales dropped by 10% last year, can flourish with a little more work. But Tapestry bought Kate Spade, beloved for her eccentric handbags and her looks, eight years ago for $ 2.4 billion, and has little to show. During the financial year completed in June, Kate Spade Sales arrived at nearly $ 1.2 billion, a touch below that of the year when the company was acquired, and well below their summit three years ago when they approached $ 1.5 billion.

“We know by the work that we have made that there is a great demand for the brand Kate Spade, we have not executed very well in recent years, but as we have said here today, we are more intelligent from the point of view of brand construction capacity,” said Scott Roe, Tapestry financial director to the brand creation Barron THURSDAY.

In 2017, Coach Inc, which also owned the small brand of high -end Stuart Weitzman shoes, renamed Tapestry in the hope of becoming an American equivalent with European fashion conglomerates LVMH and Kering, although the one that focused on high -end brands rather than outright luxury. These ambitions were behind its planned Mega-Deal of $ 8.5 billion to buy Capri, owner of Versace and Jimmy Choo. (Capri recently sold Versace in Prada, although this agreement is not yet concluded.)

However, the Federal Trade Commission blocked the tapestry-capi agreement last year, saying that it had harmed competition in the handbag segment. The justification of Tapestry was that the shared resources (major technological systems, influence with suppliers and store owners) would help optimize the structure of a brand’s costs and lift an underperformative but always viable label. But given her difficulties to finally charge Kate Spade’s acquisition, it is difficult to see how the tapestry would have managed to transform three other brands that need repairs.

However, this is not all bad news. Tapestry has supervised an astonishing rehabilitation of the Coach brand in recent years, recalling the comeback of Ralph Lauren.

Ten years ago, the classic brand of New York leather goods, beloved for its high-quality elegant bags, suffered after years of over-expansion in search of growth and finally to bend down. Since then, Coach has organized a massive return by selling much more in its own stores and less in department stores, and stopping with tons of data on its buyers and their habits to reduce the failures of the products and know what they climb towards more quickly and more precisely.

One of Kate Spade’s Ironies of Tapestry’s misfortunes is that in 2017, he said that the purchase of Kate Spade would help her earn younger consumers. Today, generation Y and younger buyers are everywhere in the coach and represent around 60% of the 1.5 million new Tapestry buyers won last year. Globaldata Director General Saunders said that the coach had conquered them thanks to his data, but also because the coach “became more contemporary and fashionable”.

And with the narrowing of Kate Spade (and the exclusion of Stuart Weitzman, which Tapestry recently discharged), Coach represents almost 80% of tapestry sales. Tapestry is therefore just a coach and a brand in difficulty one fifth of his size, rather than a wallet. Last year, sales of coaches increased by 10% and propelled Tapestry’s shares, almost double them. (They fell on Thursday due to a large part due to a price of $ 160 million in prices.)