Dive Brief:

• Tapestry on Tuesday reported that first quarter net sales fell 2% to $1.36 billion. By brand, Coach net sales rose 1% year over year to $966 million, gaining some 100 basis points through global e-commerce; Kate Spade net sales fell 6% to $306 million; and Stuart Weitzman net sales fell 9% to $87 million.

• Comparable sales at Coach edged up 1% but tumbled 16% at Kate Spade, according to a company press release. The company didn't provide total comps or results for Stuart Weitzman in that metric.

• Gross profit in the quarter fell to $914 million on a reported basis, from $935 million a year ago, while gross margin for the quarter contracted to 67.3% from 67.7%. Net income fell to $20 million on a reported basis, from $122 million in the year-ago quarter.

Dive Insight:

Tapestry, after rebranding as an accessories and apparel conglomerate and bringing on Kate Spade as a turnaround project, is scrambling a little. Still, executives on a conference call Tuesday emphasized that the quarter's results were in line with expectations.

In light of a tough comparison for Coach and the fact that Kate Spade remains an ongoing effort, the quarter's results, including the double-down on its existing guidance, is "an optimal case" for the company, according to MKM Partners Managing Director Roxanne Meyer. The company said it expects fiscal 2020 revenue to increase at a low-single-digit rate.

Tapestry in September brought on a new chief executive in hopes of a revival, replacing Victor Luis, (who had spearheaded Coach's resurgence), with Board Chairman Jide ​Zeitlin. Even taking into account fashion missteps at Kate Spade that the company itself acknowledges, however, its troubles may stem more from outside forces.

That includes, in North America, (its biggest market with its 60% revenue contribution), sales slumps through department stores and outlets, according to Jane Hali & Associates, who said in a client note that they expect Tapestry "to continue to struggle in the US due to ... weakness" in those channels.

Also among Tapestry's challenges is a fundamental shift in consumers' attitudes toward handbags, sales of which have fallen 20% since 2016, according to research from The NPD Group. "This is clearly not a blip — it's a major shift, and it is time for us to dig deeper to understand what's driving it, and to really think about the future of the market," Beth Goldstein, NPD executive director and industry analyst of accessories and footwear, wrote in an October report. "The challenge is that it's not just one thing driving the decline — it's a convergence of many marketplace dynamics." 

Those include changing preferences that mirror those for apparel, a segment that has seen growth ebb as shoppers need less, want less and buy less. Consumers these days want bags that provide convenience as much as style, are putting their money toward entertainment and wellness, are more likely to find "fashion status" in active apparel and footwear than any "it" bag, and want handbag makers to be attuned to "the social and environmental issues that matter to them," according to Goldstein. Furthermore, resale is stealing share, including in the luxury market, she said.

Zeitlin noted on Tuesday that the company's international business was stronger than at home, where it "managed continued industry headwinds," though he didn't elaborate. But he expressed confidence in both Coach, which he described as having "momentum," and Kate Spade, which he said enjoys a fashion-minded customer base that is different from Coach's. He also repeatedly noted that the company is determined to take steps to improve earnings.

"While this ultimately could translate into a favorable outcome, it could also create disruption," MKM's Meyer warned in a client note emailed to Retail Dive.

Tariffs throw another wrench into brands like Tapestry's that depend so much on handbag sales, Goldstein also said.

"Handbag brands and retailers cannot rest on their laurels and wait for the market to bounce back — it won't. This business needs to become far more consumer centric than it is today in order to return to growth," she said. The bad news for the likes of Tapestry, however, is that's "likely to come from smaller players that are very in-tune with consumers' priorities," she also said.