As fourth-quarter footwear and fashion earnings continue to roll in, one business trend is dominating: China is a huge bright spot.
Companies like Tapestry Inc. that have doubled down on the mainland in recent years are now reaping the financial benefits as China leads the coronavirus recovery.
“Our ongoing efforts to sharpen our focus on the Chinese consumer once again led to meaningful growth, with benefits from innovative product assortments, enhanced marketing and expanded reach across both direct channels and third-party online distribution,” said CEO Joanne Crevoiserat in a conference call today.
Coach, which accounts for 75% of Tapestry’s overall sales, seems to have all the right ingredients in place to capitalize on the China momentum — from innovative brick-and-mortar retail to strong digital and social media partnerships.
Revenues in mainland China rose 35% in the fourth quarter, driven by increased domestic travel as consumers stay close to home during the global pandemic that is still hitting Europe and North America hard.
The brand has also focused on bridging physical retail with enhanced digital technology in store. Its immersive Shanghai location in Iapm mall has floor-to-ceiling video walls that feature digital art — and the brand is using gaming technology to bring the experience to life for consumers.
Unique digital experiences are key when it comes to winning over Chinese shoppers, and Coach recently staged a livestream featuring 400 drones on The Bund in Shanghai. “We were the first fashion brand to utilize this format and it highlights how we’re driving brand heat…and finding innovative ways to engage with Chinese consumers,” Crevoiserat said.
With digital dominating, Coach also launched on the Douyin, the Tik Tok of China, a key initiative as Coach looks to lure in more millennial and Gen Z consumers. Luxury platform Tmall is driving sales — and Coach was a star performer during the 11/11 shopping festival.
Overall sales at Coach totaled $1.23 billion for the three months ended Dec. 26 — a 4% drop from the prior year period — and its adjusted operating income was $418 million.
For the second quarter, Tapestry posted profits of $323 million, or adjusted earnings per share of $1.15, compared with the prior year’s $304 million, or earnings per share of $1.10. Analysts had forecast earnings of $1.01 per share. Revenues declined 7% to $1.69 billion but still topped Wall Street’s forecasts of $1.63 billion.
Kate Spade recorded a 13% decrease to $376 million in sales, with adjusted operating income of $61 million, while Stuart Weitzman’s sales tumbled 27% to $85 million, with adjusted operating income of $10 million.