Victor Luis, CEO and director of Coach Inc., spoke with S&P Global Market Intelligence about the company's decision to change its name to Tapestry Inc. and how the move reflects the company's broader strategy, creating autonomy for its various brands as it pursues other potential acquisitions and evolves into a multibrand luxury goods player. Coach completed its $2.4 billion acquisition of Kate Spade in July and bought Stuart Weitzman for $574 million in 2015. For future acquisitions, Luis said Coach is looking at brands in either the United States or abroad that Coach can develop and grow using its own supply chain and resources.
Coach's share price fell 2.8% to $38.87 on Oct. 11, the day Coach announced the name change, which will go into effect Oct. 31. However, Luis brushed aside a suggestion that investors were trading on the news and mentioned a sector-wide slump for the day, citing drops for both Michael Kors Holdings Ltd. and Ralph Lauren Corp. Michael Kors fell 1.2% to end at $47.00 while Ralph Lauren shed 2.3% to finish at $85.20.
The company says it is in a blackout period ahead of the release of fiscal first-quarter numbers due Nov. 7. Luis declined to discuss how the first quarter is progressing or his outlook for the holiday season. Coach posted higher-than-expected fiscal fourth-quarter earnings Aug. 15.
S&P Global Market Intelligence: Explain the logic behind changing Coach Inc.'s name to Tapestry. Why did you decide to move to a name that is brand new to people and not use a household name like Coach as your corporate identity?
Victor Luis: As we evolved from a company where Coach Inc. and the brand were one and the same, our objective was to find a name where now Coach, Stuart Weitzman and Kate Spade are all part of the same company, and that would allow each of these brands to retain their distinct personalities, that was respecting their individual narratives and unique positionings with consumers. This is not about repositioning any of our brands in the minds of consumers. ... I think what we saw when we acquired Kate Spade is that there was some confusion among consumers that Coach was acquiring Kate Spade, and they were very worried that Kate Spade would lose its identity or that we would begin selling Kate Spade products in Coach stores, or that Coach was going to turn all Kate Spade bags into bags that looked like Coach. So all those fears I think are very relevant.
Could you explain a bit more about your ambitions as a multibrand player and how you see that evolving? Are you emulating LVMH Moët Hennessy Louis Vuitton SE and Kering SA to a certain extent?
My answer to that is that we're not copying anybody. We think we have a pretty unique culture and obviously each of our brands has a very unique identity. ... For us, it's really about a belief in brands that have a more democratic, inclusive approach to luxury. We think it's more modern, and we think it's where the millennials are headed. At the end of the day, there is room for brands such as Kate, Coach and Stuart Weitzman to continue to grow because of their positioning. When we look at the growth of the middle class, when we look at consumers continuing to be interested in luxury globally, it gives us a tremendous amount of confidence that obviously we have the skill set to help these developing brands, especially Stuart Weitzman and Kate, to take their fair share especially outside of North America where they have the vast majority of their business today.
Can you tell us about your acquisition strategy going forward? What kind of companies would you be interested in acquiring and adding to your stable?
We’re always going to use a filter. It truly is about brands that we believe we can add value to. We've talked about being very interested in the handbag and accessory, outerwear and footwear space. That remains an important filter for us now, and we're looking for brands where we can help them grow globally and leverage our supply chain.
I wouldn't mention any specific brand. I would only say that we very strongly feel that we're not limited by nationality. When folks ask if we are creating an American LVMH, I guess we can say that we're based here in New York City, so by that measure someone can call us American. But the reality is that we don't want to limit ourselves to any specific nationality. We could just as easily look at potential brands to join Tapestry that are based in Europe or that are in other parts of the world such as Asia.
Could you give us some insight on why you chose the name Tapestry?
It kind of achieved several things. It kind of was a nod to this idea of an individual beauty, individual expression. Because you have in the tapestry many different colors, many different threads, many different ideas coming together in one collective beautiful piece of work. The idea that a tapestry is a company — has all these individual people — is a metaphor that really resonated with us. We also loved the fact that tapestry as a name speaks to crafts, speaks to craftsmanship and to heritage which was important to us because all of our products are truly made by hand. And then lastly, we loved the fact that it didn't limit us. At the end of the day it did not limit us to a specific geography, to a specific category, and allowed us to have long-term growth.