Everyone says Gen Z isn't spending. Coach disagrees.

[00:04] interviews from Cannes. The Tapestry CEO sat down with executive editor Brian Sozzi to discuss the state of the luxury retail market. >> How do you explain all the the momentum behind the Coach brand?

[00:17] start with our team. We have a great team and we've built our growth engine by design and it really is fueling a culture of creativity. So bringing it

[00:30] back to why we're here at Cannes, um you know, we've defined our target market. It's a massive TAM, right? We speak to a lot of consumers and we've really gotten focused on this point of market entry young consumer who's buying

[00:45] a luxury handbag perhaps for the first time. We want to earn the right to be that customer's first luxury bag purchase. And as we get really focused, our team is insatiably curious about how to do that, how to be relevant for that

[01:00] target customer, bringing all of our brand building capabilities that we've intentionally built over the last 7 years together with the creativity that that customer is craving. And so when we come to a place like this, I think it

[01:14] explains that real insatiable curiosity that our teams have to learn what's new, to understand culture to deeper level and connect the consumer to our brands winning the day for Coach. >> I I came across this stat and it's

[01:30] while, maybe because I'm just getting old and it was from JP Morgan and I think they said 25 million people turn 18 and I'm like, that is a huge driver of your

[01:44] it's it's their first handbag that they ever bought on their own, right? authentic to who we are. If you think about and you know, you and I have been in this business for a long time, is we do work with consumers, we hear

[01:58] frequently about Coach or Kate Spade and just the fond memories consumers have. It was my first luxury bag purchase. I remember how it made me feel. So, those two moments of inspiration for us are this is authentic to who we are. We are

[02:14] a brand that speaks to actually 2 billion people around the world can afford to buy one of our handbags. And so, with that large an audience, we had so, with that large an audience, we had to get focused became focused on this

[02:27] first luxury bag buyer because it is so authentic to who we are and the great news is that 25 million women in the markets where we serve today will turn 18 this year and every year for the next

[02:40] 10 years. So, that provides a tremendous opportunity, but that's all that is is opportunity. Then we have to do the work to understand culture, understand the customer, and take those insights and and bring them forward with great

[02:54] and bring them forward with great product, great brand experiences, and together in service of the brand and the emotional connection with the consumer. into your store, look, you're 18 years old. You don't have a lot of You don't

[03:07] probably buying a 8-900 bag. When they walk into your store now, in that Coach store, what are they buying as their first bag? >> Well, an interesting insight, Brian, a Gen Z consumer gives us about 60 seconds

[03:21] to determine whether they want to be there. there. >> 60 seconds is all we have to have that customer feel like it's a brand for them, that they're in a place where they

[03:33] can feel inspired, they can be engaged. So, we spend a lot of time understanding what's important to this customer, not just, you know, what kind of handbag and what is the trend style, but how they want to be treated, how we have to

[03:47] it accessible so they feel that they can be they can touch it and explore it and try it on. We do actually a lot of work on training our associates on how to engage a Gen Z consumer who walks into our store because it doesn't look the

[04:03] >> do you engage them? Hey, hey, hey, buddy. I did [laughter] this panel. >> It's It's It's knowing that, right? It's knowing how to engage them, knowing that it's not important to just be in their face

[04:17] every minute. It's It's knowing how to give them help because they don't really want help, but they want help. And understanding that nuance and actually we have AI training tools that help our associates not only train to understand

[04:31] what to do, but then practice how to do it. And these AI training tools give tips in real time back to our associates, which is a less intimidating way to train on your techniques and in the ways that we engage and approach our

[04:45] customers. So, I would say that the takeaway is that we understand we take it very seriously to understand what's important to our consumers. And then we invest. We invest behind not only the products that we're delivering. So, you

[04:59] the Brooklyn bag or the Terry bag, which are, you know, tremendous Gen Z engagement vehicles. They love these bags and the innovation we're bringing there is is terrific. But it also matters the experience that we give them

[05:14] when they come into the store and the marketing and how they see us where they as well. >> I earlier we got a conversation with uh and he was telling me a story he was trying to tell around his legacy brand

[05:30] to a store I believe in the late '70s that used to sell music. And I was thinking of you all um amazing heritage uh amazing story to tell there. How is that How is channeling your heritage helped revive this business?

[05:44] >> What is so critically important is that we're not just a brand for today. We are a brand with heritage and and to your point, we go back to that inspiration of the baseball glove. Our glove tanned leather was inspired by the glove the

[06:00] >> I got to tell my boss George, he's over there. He's a big baseball fan. >> Yeah, because you know, that is if you you probably still have your childhood >> Well, you you are you are still young. So, you probably still use it, too.

[06:14] >> But in our house, they may be older, but that leather the patina gets better over time and that inspired the Coach brand from its very beginning. It's it's this genuine crafted to last product that was inspired by a baseball

[06:30] glove and has built on this credible credibility for being a house of leather over many generations. And so, it is important not to let go of being genuine and and the courage to be real this bringing that back today for a modern

[06:46] bringing that back today for a modern consumer is about allowing the consumer to build confidence through self-expression with our product and our brand. Genuine leather crafted to last. That is something that has been

[06:58] consistent over time and will remain consistent into the future. And the reason we're here today is to understand how to take that territory and make it relevant for a young consumer and bring the right product to to market, bring

[07:12] the right experiences in terms of our store experience or the AI gift concierge that we have at Kate Spade, right? What is that experience that is relevant to a modern consumer but brings the brand heritage forward in a very

[07:26] important. >> Marriott CEO told me July 4th holiday bookings are strong. What's the state of that consumer that strong, somewhere in between? >> There's a lot written about, you know,

[07:40] particularly for young consumers, our target consumer group, yet quarter after quarter we're acquiring millions of new consumers every quarter. innovation and the relevance that they're looking for.

[07:55] selling. >> I think they're prioritizing. And you know, frankly, in a in a world where the consumer may feel more challenged, and again, lot written about that, I love our value proposition in that market.

[08:08] You know, we are well-positioned to compete and win in any market given the really the strength of our value proposition. But that isn't just a price point. I think it is really important to say that what the consumer's responding

[08:22] innovation we're delivering. And that innovation happens in product. You know, we've talked about the Tabby bag and the Brooklyn bag and the Terry bag or the Duo at Kate Spade. We're seeing growth in AUR, double-digit growth in AUR.

[08:36] >> in a row. >> Uh more than that, almost five years in a row now at the Coach brands. So we, you know, we have consistently seen this young customer engage our brand for the first time

[08:48] and they're coming in at higher than average AUR. So a young consumer who's shopping at a price point that's higher than our average consumer. And now the the beautiful thing is when we deliver a great first experience, we see them

[09:02] coming back with higher frequency. So retention rates of our young consumer are actually higher than any other age cohort. So we're starting to see the compounding benefits of the work that we're doing. And you know, the the

[09:15] reason we're here today is because we're not complacent with those results. It makes us even more curious about what's happening in culture so that we can >> So you're planning for a big holiday season?

[09:28] season. >> every day it's like one day closer to you You there are so many wonderful opportunities to um um to drive our business. Holiday is

[09:42] showcase our brands and create more emotional connections with our brands to our target consumers. But, we're seeing that in the everyday. Actually, uh over 60% of Gen Z consumers like to give gifts just to brighten

[09:58] someone's day. So, we're actually seeing the younger consumer not need a reason >> [laughter] >> Please, please. I'm I'm all in. >> You know, and and I think it's it's a signal that that customer isn't just

[10:10] waiting for the moment in the year where they're supposed to gift. They're doing it because they feel that they want to drive brighten someone's day, drive that emotional connection around to their friend group, and live more in the

[10:24] moment. This is a consumer group that we often hear is struggling with, you know, affordability issues, but one that is maybe putting off life moments. They're tomorrow or maybe getting married, but they do want to live for today and

[10:40] really make the best of what they have today. And the value proposition that we deliver, which includes the incredible innovation and creativity that we're delivering, in addition to the trend right silhouette and the price points

[10:55] that we're delivering, make it a compelling option for our consumers.