Tapestry coach owner sees gradual recovery in lockdown-hit China

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Items are seen at a Kate Spade store, owned by Tapestry, Inc., in Manhattan, New York, U.S. November 19, 2021. REUTERS/Andrew Kelly

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May 12 (Reuters) – Tapestry Inc (TPR.N) said it was confident demand for its luxury bags and clothes in China would pick up after the key growth market lifted COVID-19 curbs, easing concerns. concerns over a reduction in forecasts and sending Coach owner shares 11% higher.

The company and rivals such as Gucci owner Kering SA (PRTP.PA) and Ray-ban maker EssilorLuxottica (ESLX.PA) have been hit by Beijing’s zero COVID policy that has kept consumers at home, obstructed highways and closed factories.

Greater China revenue for Tapestry is expected to decline 35% in the fourth quarter, assuming the Shanghai shutdowns end in early June. That prompted the company to lower its full-year earnings forecast to $3.45 per share from an earlier estimate of $3.60 to $3.65 per share.

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However, chief executive Joanne Crevoiserat said the company expected a gradual market recovery and was well placed to drive growth. “The Chinese consumer is incredibly resilient, we’ve seen that throughout the pandemic,” she said.

NORTH AMERICAN FORCE

During the third quarter ended April 2, Tapestry was able to weather the blow from China thanks to strong demand for luxury goods in North America.

Net sales jumped 13% to $1.44 billion, beating analysts’ expectations of $1.42 billion, as consumers returning to parties and other social events after two years of the pandemic splurged on high-end fashion despite galloping inflation.

Struggling with rising commodity prices, Tapestry tried to protect its margins by raising prices and said there was room for further increases.

“While core customers of all Tapestry brands are affected by inflation, their income and financial profile means they can cope with its impacts far better than the average consumer,” said Neil Saunders, Managing Director of GlobalData.

Adjusted earnings came in at 51 cents per share, beating estimates of 41 cents, according to Refinitiv IBES data.

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Reporting by Uday Sampath in Bangalore; Editing by Aditya Soni

Our standards: The Thomson Reuters Trust Principles.

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