New Tapestry Will Be Led by Coach, but Capri’s Brands Bolster Position in Accessories and Luxury

We believe Tapestry has a narrow moat based on the brand strength and pricing power of Coach (76% of fiscal 2024 revenue). The firm has turned Coach around through store closures, restrictions on discounting, and increased e-commerce, the last of which took off during the pandemic. The brand is a leader in the attractive handbag category and consistently generates gross margins above 70%. Further, we expect growth in complementary categories like footwear and fashion. We anticipate China to be a key growth region for Coach, as according to Bain, Chinese consumers will make up 35%-40% of worldwide luxury goods spending in 2030, up from 22%-24% in 2023. We forecast Coach’s Greater China sales to reach nearly $1.3 billion in 10 years, up from $902 million in fiscal 2024.