Coach's Parent Company CEO Suddenly Stepped Down, The Incident Of "Insulting China T-Shirt" Became A Fuse.

In a moment of uncertainty, no luxury brand dares to belittle the Chinese market.

According to fashion business news, Coach parent Tapestry group announced a statement on Wednesday, announcing that Jide Zeitlin is the new CEO, and will continue to serve as chairman of the board. The 13 year old Victor Luis left immediately, but did not disclose the specific reasons, causing the industry's high concern.

Victor Luis

According to statistics, Jide Zeitlin was elected a member of the board of Tapestry in June 2006 and has served as chairman of the board since November 2014. He has served in Goldman Sachs for 20 years and has had many senior management positions and has rich experience. However, Jide Zeitlin said in a statement that in the future, it would be appropriate to identify with the board members the right candidates for the new CEO at the right time, which means that Jide Zeitlin will be the role of transitional CEO.

Jide Zeitlin was elected as a member of the board of Tapestry in June 2006 and has rich experience.

The picture shows the top five shareholders of the group.

The picture shows the revenue and profit growth figures of the group in the past five quarters.

Some analysts believe that Victor Luis may be the scapegoat for the "T-shirt incident" half a month ago. A T-shirt of the Coach brand has been exposed to the fact that Hongkong Macao is listed as a state. Then the spokesman Liu Wen immediately decided to cancel the contract. Although Coach said it would respect Liu Wen's decision and stressed that no claim would be filed with Liu Wen, the related incidents continued to ferment.

Coach chief executive Joshua Schulman said in a media interview last year that the Chinese market is expected to become the largest source of revenue for the brand in the world. Victor Luis also stressed in the latest earnings report that China is a very important market for Coach. At the end of last month, Yang Baoyan, President and chief executive of Coach Greater China, said in an exclusive interview that the brand will continue to increase its investment in China. On behalf of Coach, I would like to express my sincere apologies to the Chinese consumers who are hurt by the incident.

Victor Luis became the first executive to quit the "T-shirt" incident

It is noteworthy that Tapestry group is not the only luxury brand involved in the "disgrace of Chinese T-shirt". Since its exposure to the T-shirt of Italy brand Versace bought by Capri group, LVMH brand Givenchy, Fresh and Japanese sportswear brand Asics, American Apparel Group Calvin Klein and jewellery brand SWAROVSKI are also involved in this storm.

In addition to the Tapestry group, none of the other brands responded to the spokesperson's cancellation and brand's next move. It only issued an apology statement on micro-blog's official social accounts, which means that Victor Luis became the first executive to quit after the incident.

However, some analysts believe that the "insult T shirt" incident is just a fuse. The reason behind the resignation of Victor Luis is no longer related to the board's patience with him. Since the acquisition of Kate Spade, the various measures of Victor Luis have not significantly improved the performance of Tapestry group.

Victor Luis became chief executive of Coach group in 2013. He once said that Coach can go far beyond light handbag products. Under its leadership, the Coach parent company launched the acquisition strategy in 2015 to enrich its brand matrix. After taking the Stuart Weitzman, it bought us rival Kate Spade&Co. in 2017 for 2 billion 400 million US dollars, then renamed it Tapestry, aiming at forming a matrix to create "us LVMH" to better compete with European competitors.

As an important step in strategic reform, Victor Luis has also adjusted the group's executive structure, and appointed Joshua Schulman as the chief executive of Coach brand, so that he can focus more on the overall strategic layout of the group and find new acquisition targets.

But for Victor Luis's ambitions, investors and analysts hold different opinions. David Silverman, senior director of debt rating agency Fitch Ratings, agreed with Victor Luis's acquisition strategy, saying that the decision made by Victor Luis after joining Coach group was very correct. It saved the image of the brand falling to the bottom because of excessive promotions, and also brought about a lot of revenue for the group, which made Coach regain the love of consumers.

John B. Morris, a senior retail analyst at BMO capital, believes that while Coach is busy buying, it should not ignore the harsh retail environment. The rapid change of millennial consumer preferences is a tough challenge for brands.

Jefferies analyst Randal Konik even questioned the brand combination of Tapestry group. He believed that the three brands lacked a stable foundation. At least for now, the performance of the Tapestry group was only temporary when the new brand joined, and then cooled again. "Coach brand is stagnant, Kate Spade is still not out of the woods."

In the 2019 fiscal year ending June 29th, Tapestry Group sales increased 3% to 6 billion 30 million US dollars compared with the same period last year, less than the 31% growth rate in the previous year, and net profit rose 61.5% to 643 million US dollars during the period. Among them, Coach's fourth quarter sales rose 2% to 1 billion 100 million US dollars compared with the same period last year, the annual sales increased by 0.7% to 4 billion 270 million US dollars, the gross profit margin was 69.7%, the sales in the Greater China region accounted for 18%, and the sales in other Asian regions accounted for 20%. In order to better penetrate the Chinese market, the two Coach withdrawal from Tmall is scheduled to be re entered in September.

Sales of Kate Spade have been disappointing. Sales in the fourth quarter increased by 6% to $332 million, and sales for the same year rose 6% to $1 billion 370 million, while same store sales fell 6%, with a 1.4% expected gross profit margin of 63.2%. Stuart Weitzman's fourth quarter sales surged 17% to 85 million US dollars compared with the same period last year. The annual sales increased by 4% to 389 million US dollars, the gross profit margin was 49.8%, but the operating loss was 51 million US dollars.

As of the end of the reporting period, Tapestry group's three brands had 1540 sales outlets worldwide, including 986 Coach brands, 407 Kate Spade and 147 Stuart Weitzman.

Jide Zeitlin said in an interview that Tapestry group will continue to focus on multi brand strategy, but it needs to work hard in terms of execution. Perhaps in order to placate investors, Jide Zeitlin also stressed in its statement that Tapestry group will maintain a double-digit increase in sales in fiscal year 2020, with a flat profit expectation that it will plan to buy back about $700 million.

After the news release, Tapestry group's stock price opened up 4.23% to 21.3 dollars, but it has fallen more than 40% in the past 6 months, and its market value is now about 6 billion 100 million dollars.