Sputtering Kate Spade Line Bets Elusive Revival on Color and Whimsy

(Bloomberg) -- Tapestry Inc.'s new top executive knows Kate Spade is in bad shape, and he's turning to new products to spur a sorely needed recovery.

Shoppers will begin seeing changes in Kate Spade's offerings this holiday season, with more to come next summer, Chief Executive Officer Jide Zeitlin said in an interview. The brand wants to sell more “fun, playful” handbags -- like the wicker basket satchels and elephant-shaped crossbody bags in hues like hot chili and flapper pink that it currently offers.

The changes are part of a deeper effort to revitalize the fashion brand, and management has also hired external consultants to review the entire business, with Kate Spade a key area of focus. The review will look at Tapestry's stable of brands, consumer preferences, product development and the supply chain to find cost savings.

For Kate Spade, Zeitlin plans to infuse its merchandise with more colors and novelty items, which are a special line of quirky goods from tote bags to earrings. Novelty products have historically counted for 4% to 5% of Kate Spade's merchandise, but that number has dipped over the past year. Zeitlin said these items are particularly important because they have a disproportionately large impact on shopper engagement.

Tapestry stock has fallen 20% this year, compared with 23% gains for the S&P 500 index and the S&P 500 consumer discretionary index.

Luxury Stable

Zeitlin took the reins of Tapestry, which also owns Coach and Stuart Weitzman, in September. He inherits the stable of brands put together by previous CEO Victor Luis, who aimed to create an American rival to Europe's luxury conglomerates like LVMH and Kering SA. Zeitlin said he has no plans to abandon that strategy.

Sales at Kate Spade have fallen every quarter since Tapestry bought the label for $2.4 billion in 2017. Last quarter, same-store sales plummeted 16%, the steepest quarterly drop since the acquisition.

Zeitlin assured analysts on a conference call Tuesday that his team is fully aware of the realities facing the ailing label. “When you look at a premium fashion brand, you do not turn it on a dime,” he said. “We really believe we're not telling ourselves stories. We're not telling you stories.”

Some of Kate Spade's problems come from forces management isn't able to control. Executives said Tapestry's China business has been “constrained” by the ongoing protests in Hong Kong. Meanwhile, several of Kate Spade's product lines have been pressured by escalating trade tensions and tariffs.

“There's a lot of work ahead of us,” Zeitlin said in the interview.

To contact the reporter on this story: Kim Bhasin in New York at kbhasin4@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder, Matt Townsend

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