The New Tapestry Will Continue to Be Led by Coach, but Capri Will Bolster Position in Global Luxury

We believe Coach (74.5% of fiscal 2023 revenue) has the brand strength and pricing power to provide a narrow moat for Tapestry. 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 38%-40% of worldwide luxury goods spending in 2030, up from 33% in 2019. We forecast Coach’s Greater China sales to reach $1.3 billion in fiscal 2033 (20% of sales), up from $897 million in fiscal 2023 (18% of sales).