Tapestry believes it has found the key to ‘expressive luxury’ for Gen Z: a ‘Goldilocks’ balance of aspirational and accessible

(SeaPRwire) –   Tapestry has an explanation for why Gen Z shoppers consistently purchase Coach bags: the brand is stylish enough to feel like a meaningful accomplishment, yet affordable enough that consumers can actually make that purchase a reality.

“Our pricing and brand positioning for expressive luxury is quite literally the perfect middle ground in our industry,” Todd Kahn, CEO and brand president of Coach, told analysts on Wednesday. “On one hand, we deliver aspirational design, fashion, and quality, while keeping our price point incredibly accessible.”

The numbers show this strategy is paying off. Tapestry, the luxury accessories conglomerate that also owns Kate Spade, announced a record-breaking third fiscal quarter on Wednesday. Pro forma revenue rose 23% compared to the same period last year, operating margin expanded by 490 basis points, and earnings per share jumped 62% to $1.66 — all figures that exceeded the company’s prior guidance. The firm raised its full-year forecast, now targeting $7.95 billion in revenue and $6.95 in EPS, which would mark 35% earnings growth.

Coach, the main driver of this growth, saw constant-currency revenue climb 29%. Sales rose 27% in North America, jumped 58% in Greater China, and increased 27% in Europe. The brand gained 2 million new customers just in this quarter, with Gen Z customer acquisition accelerating “significantly,” per CEO Joanne Crevoiserat.

“We could add millions of new customers each quarter for the next decade and still barely tap into the full potential,” Kahn noted.

The first-bag moment

At the core of Tapestry’s growth strategy is a wager on what its executives refer to as the “first luxury bag” milestone — the notion that Coach can claim the emotional and commercial moment when a young shopper makes their first foray into luxury purchasing.

“When we speak with consumers, we hear time and time again about how clearly they remember their first bag purchase and how significant that milestone is in their lives,” Crevoiserat shared. “We want to earn the opportunity to be our customers’ first luxury bag buy.”

This wager is backed by solid data. Executives pointed out that Gen Z customers have higher retention rates than other consumer groups, meaning the earlier Coach signs them on, the longer their lifetime customer value timeline. The influence also flows in reverse: Crevoiserat highlighted a “reverse influence” trend where Gen Z shoppers are pulling older generations back to the brand as well. Though she didn’t put it exactly that way, the core idea is that millennials have lost their cool factor, and Gen Z is the group that determines which brands — and which bags — gain popularity.

“We’re not only driving this customer acquisition cycle, but this demographic is also influencing shoppers across all age groups,” she noted.

This flywheel framework is key to how Tapestry presents its long-term growth story to Wall Street. New customers boost brand buzz, which in turn justifies increased marketing spending — Coach is now on track to hit $1 billion in annual marketing expenditures. More marketing drives wider brand awareness and more new customers, while repeat purchases from aging Gen Z shoppers grow the existing customer base. And this cycle repeats continuously.

Fewer SKUs, more heat

The product strategy supporting this growth is so disciplined that it feels almost counterintuitive: fewer product options, greater impact.

“We’re operating with fewer SKUs,” Kahn stated. “We’re managing our offerings far more tightly than we ever have before, and we’re focusing on expanding our core product lines.”

This means doubling down on its flagship product lines: the Tabby, the New York family (Brooklyn, Empire, and the newly launched Chelsea), plus Teri, Laurel, and Rowan — all while creating scarcity via limited-edition drops that sell out within days.

“We launched a pink-colored collection that I thought would sell through the third and fourth quarters,” Kahn explained. “It actually sold out in days, not weeks. Those are the kind of positive problems you want to have.”

He argued that the consistent creative direction behind the product lineup — which Kahn attributes to long-time creative director Stuart Vevers and a team that has stayed together for years — is itself a competitive advantage.

“The most critical factor is that our creative team has well-informed instincts,” Kahn noted. “We aren’t outsourcing our design work, and we haven’t yet handed off our commercial expertise to AI.”

Core leather goods unit sales volumes rose more than 20% during the quarter, while average unit retail price (AUR) increased at a low double-digit pace — a rare simultaneous growth in both price and volume that analysts have cited as a sign of true brand strength.

‘Where do we go from here? We’re just getting started’

This optimism extends to the company’s long-term outlook. BTIG analyst Bob Drbul noted during the earnings call that Tapestry’s FY26 guidance would allow it to hit its Investor Day financial targets two full years earlier than planned. Crevoiserat’s response set the tone for the rest of the question-and-answer session.

“We’re only just beginning,” she shared.

Kahn went even further, restating a long-term goal that may have seemed unrealistic just a few years prior: “I’m more confident now than ever that the Coach target of $10 billion in revenue with industry-leading margins is within reach.”

Not every brand in Tapestry’s portfolio is performing strongly. Kate Spade’s revenue dropped 11% during the quarter, falling slightly short of expectations, weighed down by a strategic reduction in promotions and ongoing brand investment. The brand remains profitable on a gross margin basis, and standout products like the Duo Mini — which sold out after being seen on Kendall Jenner — prove that this strategy can work. But management admitted that the path back to strong growth will not be quick or straightforward.

“We also understand that turning around a brand takes time, and the road to long-term growth isn’t always a straight line,” Crevoiserat noted.

For the time being, Tapestry’s brand story — and its stock performance narrative — is driven by Coach. And executives are betting that as Generation Alpha grows old enough to enter the luxury market, following in Gen Z’s footsteps, the company’s potential customer base will only expand.

“Soon enough, Generation Alpha will join the market, and they’ll be part of our customer acquisition strategy,” Crevoiserat stated. “That’s our long-term growth formula.”

For this article,  journalists used generative AI as a research tool. An editor confirmed the accuracy of the details before publication.