Tapestry, the parent company of luxury brand Coach, has announced an increase in its profit forecast for 2024. The decision was driven by a surge in demand in China and robust profit margins. During the second quarter, Tapestry witnessed a 19% rise in sales in China and an 11% increase in Europe, indicating a recovery in these crucial markets. This positive trend can also be seen in other luxury retailers such as Ralph Lauren, Canada Goose, and LVMH.

The sales boost in China is credited to an uptick in travel expenditure from mainland Chinese tourists, as well as increased spending across Asia and Europe. With an expanding affluent consumer base in China, the personal luxury sector is expected to experience further growth, benefiting Tapestry and its brands.

In the second quarter, revenue for Tapestry’s main brand, Coach, saw a 6% increase, largely fueled by the strong sales performance of its Tabby handbags, which nearly doubled compared to the previous year. However, its Kate Spade and Stuart Weitzman brands experienced declines in sales. CEO Joanne Crevoiserat outlined plans for pricing improvements in the upcoming year to ensure the company maintains its momentum.

Tapestry’s net sales for the quarter ending on December 31 exceeded expectations, reaching $2.08 billion. Additionally, margins expanded by 300 basis points due to lower freight costs. As a result, Tapestry now anticipates adjusted earnings per share of $4.20 to $4.25 for 2024, surpassing its previous forecast of $4.10 to $4.15.

While Tapestry’s positive outlook resulted in a 6.5% increase in its shares, Capri, another luxury fashion company, experienced a decrease in its shares due to lower gross profit margins.

Overall, Tapestry’s upward revision of its profit forecast signifies a resurgence in demand in China and strong performance from its Coach brand. With the implementation of further pricing improvements and the continuous growth of the consumer base in China, the company is positioned for ongoing expansion in the luxury handbag market.

Useful links:
1. Tapestry’s Profit Forecast Boosted by China’s Economic Recovery
2. Tapestry’s Profit Forecast Rises Due to Strong Sales in China