Tapestry Inc, the owner of Coach, has reported better-than-expected sales in the latest quarter, fueled by strong demand for luxury handbags and apparel in China. The New York fashion house saw an 8% increase in shares during premarket trading, attributing the growth to a significant surge in online sales and double-digit sales growth in Mainland China. This positive performance aligns with the upward trends experienced by other luxury brands like LVMH, Kering, and Hermès.

Luxury goods makers, including major fashion capitals, were severely impacted by the COVID-19 pandemic and subsequent lockdowns earlier this year. The decline in tourism further worsened the situation. However, with the easing of restrictions, China and some other parts of Asia have experienced a sharp rebound in demand, primarily driven by the affluent population. These consumers typically made most of their luxury purchases while traveling abroad, but the current circumstances have compelled them to shop more locally and online.

In the quarter ending on September 26, Tapestry reported a 13.7% decrease in net sales, amounting to $1.17 billion. Nevertheless, this figure exceeded analysts’ average estimate of $1.07 billion. Net income also saw a significant increase, rising from $20 million to $231.7 million compared to the same period last year. This rise can be partly attributed to Tapestry’s absorption of over $70 million in impairment charges from a year earlier. Additionally, the company received over $90 million in tax benefits during the reported quarter. Adjusting for these exceptional items, Tapestry reported a profit of 58 cents per share, surpassing analysts’ expectations of 23 cents per share.

Amid the ongoing challenges posed by the pandemic, Tapestry’s strong performance in China serves as a positive signal for the luxury industry. While uncertainties still exist, the rebound in demand in key markets like China showcases the resilience of luxury consumers and their willingness to invest in high-quality, iconic products. The importance of digital platforms in reaching and engaging with customers has also been emphasized by the significant contribution of online sales to Tapestry’s growth.

Looking ahead, Tapestry is optimistic about its growth prospects for the year as it capitalizes on the recovery of the Chinese market. The company’s ability to adapt to changing consumer behavior and leverage online channels positions it well to seize ongoing opportunities. By prioritizing the needs and preferences of its customers, Tapestry continues to strengthen its position as a leading player in the luxury fashion industry.

In conclusion, Tapestry’s strong performance in China, driven by increased demand for luxury goods, has surpassed market expectations and highlights the resilience of the luxury sector. With a focus on online sales and a rebound in the Chinese market, Tapestry is well-positioned for growth in the coming year. As the fashion industry navigates the challenges posed by the pandemic, capturing the attention and loyalty of Chinese consumers will be crucial for success in the luxury market.

Useful Links:
1. Business of Fashion: Tapestry Reports Accelerated Sales Recovery on Demand in China
2. The New York Times: Tapestry, the Parent Company of Coach, Sees a Spike in China Sales