Tapestry Inc., the parent company of Coach, is making efforts to revive the struggling Michael Kors brand following its $8.5 billion acquisition of Capri Holdings Ltd. Michael Kors, which contributes significantly to Capri’s revenue, has experienced larger declines in sales compared to its higher-end competitors due to inflation affecting its mass-market US customers and reduced spending by aspirational consumers after a surge in handbag purchases during the pandemic.
However, Tapestry executives believe that there is an opportunity to apply successful turnaround strategies used for the Coach and Kate Spade brands to rejuvenate Michael Kors. According to Joanne Crevoiserat, the CEO of Tapestry, Michael Kors has a strong brand that resonates well with a younger and more diverse consumer base. The company plans to boost direct-to-consumer sales for Michael Kors while reducing its reliance on department stores, which have been a weak point in recent quarters. Currently, department stores contribute around 10% of Tapestry’s revenue, while Capri generates approximately one-third of its sales through the wholesale channel.
To attract more consumers, Tapestry intends to significantly increase its marketing investments and create a stronger appeal for the brand. In recent years, the company has more than doubled its marketing expenditure while maintaining profitability. Tapestry foresees low-single-digit percentage revenue growth for Capri in the next three years, with a temporary dip in revenue expected for this year. However, in the long term, the company expects Capri’s sales to grow in the mid-single digits.
Although Tapestry has successfully revived brands like Coach in the past, analyst Neil Saunders from GlobalData believes that turning around Michael Kors will be more challenging. While similar strategies can be applied, the complexity of the task will be greater.
In conclusion, Tapestry is determined to revitalize the struggling Michael Kors brand by implementing successful strategies used for other brands like Coach. By focusing on direct-to-consumer sales, reducing reliance on department stores, increasing marketing investments, and envisioning long-term growth, Tapestry aims to maximize the potential of its acquisition of Capri Holdings Ltd.
Useful links:
1. Tapestry Inc. Official Website
2. Capri Holdings Ltd Official Website
