Tapestry Inc, the parent company of Coach, has revised its annual profit forecast upwards, citing strong demand for Coach handbags, price increases, and an uptick in the Chinese market. As a result, the company’s shares experienced an 8% surge, reflecting investor confidence in its prospects. Furthermore, the company’s third-quarter results exceeded market expectations, bolstering optimism about its future.

One significant factor contributing to Tapestry’s success is the rebound of the Chinese market. After the lifting of lockdown restrictions, the luxury fashion company witnessed a remarkable 20% surge in revenue from China. This surge is particularly significant given the reported decline in luxury purchases in the United States, as observed by other fashion giants like LVMH and Kering. Experts attribute Tapestry’s favorable performance to its ability to attract younger consumers, notably from the Gen Z and millennial demographics, with its affordable Coach handbags.

Tapestry’s impressive performance is further evident in the improvement of its gross margin, which reached 72.8% compared to the previous year’s 69.9%. This increase is noteworthy, especially considering the prevailing slowdown in the U.S. luxury industry. Despite a general softening of trends in April, CEO Joanne Crevoiserat, while noting a mid-single-digit decline in fourth-quarter North America sales, expressed optimism regarding the company’s overall trajectory.

Beyond revenue growth, Tapestry has also made significant strides in tight inventory management. By optimizing its stock levels, the company ensures it can meet consumer demand without excessive stockpiling. This strategic approach positions Tapestry to navigate the challenging circumstances posed by the post-pandemic landscape effectively.

Based on its positive performance, Tapestry has adjusted its per-share earnings forecast for the fiscal year 2023 to a range of $3.85 to $3.90, up from the previous estimate of $3.70 to $3.75. The company has also raised its annual revenue forecast to approximately $6.7 billion, highlighting its positive outlook for the luxury fashion brand.

In contrast to concerns about potential earnings setbacks and a lowered outlook, Tapestry’s ability to outperform its competitors in the U.S. luxury market exemplifies its resilience and adaptability. By successfully attracting new customers and increasing spend per customer, the company has demonstrated its ability to thrive in challenging circumstances. Furthermore, its astute inventory management further strengthens Tapestry’s position as it moves forward.

Overall, Tapestry’s revised profit forecast and strong performance underscore its capacity to succeed amidst the wider decline in the U.S. luxury industry. Capitalizing on the popularity of its Coach handbags and seizing opportunities in the Chinese market, the company remains resilient and well-positioned for future success.

Useful links:
1. Coach