Coach parent Tapestry cuts sales forecast on tepid demand in US, China

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Coach parent Tapestry cuts sales forecast: The parent company of Coach and Kate Spade, Tapestry, had a rough go of it in the third quarter, missing revenue projections and slashing its yearly sales prediction due to weak demand for Coach and Kate Spade accessories and tote bags in important areas like China and North America.

The company’s estimated fourth-quarter profit fell short of forecasts, causing a 2% drop in share price and highlighting the difficulties it faces in the retail industry.

Demand for Tapestry’s leather footwear and handbag brands has been reduced due to weak consumer spending in North America, which is driven by inflationary pressures and cautious mindset post-pandemic. Similarly, the region’s weak sales growth is a result of China’s unstable economic dynamics.

Low consumer confidence in North America, worsened by continuous inflationary pressures, was the reason CEO Joanne Crevoiserat gave for the dip. Sales for Tapestry in its biggest market have taken a hit due to the cautious mindset that has led to less discretionary spending.

Reflecting larger difficulties in both markets, sales in Greater China fell 2% and revenue in North America fell 3% throughout the quarter.

Margin expansion, decreased freight costs, and strict expense management allowed Tapestry to surpass profit estimates despite the sales fall. Legal obstacles have arisen, however, from antitrust authorities who fear the $8.5 billion purchase of Michael Kors’s Capri division may limit competition among marquee brands.

But Tapestry is still planning to close the deal in 2024 because it believes in the acquisition’s benefits. Despite slightly lower-than-expected net sales of $1.48 billion for the third quarter, the company surpassed expectations with adjusted earnings per share of 82 cents.

Future projections for Tapestry’s profit and revenue include a lowered fiscal 2024 revenue target of over $6.6 billion, down from earlier projections, and a fourth-quarter profit of 85 cents per share, below analyst estimates. The company’s determination to remain profitable while facing persistent problems was demonstrated by its decision to keep its profit prediction between $4.20 and $4.25 per share, regardless of the sales revision.

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