Coach Parent Tapestry Lowers Annual Sales Forecast Due To Weak Demand in the U.S. and China

On May 9, Tapestry, Inc., an American conglomerate that owns brands such as Coach and Kate Spade New York, lowered its annual sales forecast due to weak sales.

Third and fourth-quarter profits were also lower than expected, and caused the company’s stock price to fall 2%.

In the latest quarter, North American sales, comprising 61% of total sales in 2023, saw a modest 3% dip, while Greater China experienced a comparable 2% decline in sales. This slump in demand for Tapestry’s leather handbag and footwear brands can be attributed to China’s fragile post-pandemic recovery and lower discretionary spending in North America, where prices have risen significantly.

Joanne Crevoiserat, Tapestry’s chief executive officer, said, “Consumer confidence is low in North America, likely impacted by sticky inflation. And so we are seeing an overall more cautious consumer.”

On the other hand, Tapestry’s earnings per share (EPS) beat market expectations. Net sales for the third quarter were $1.48 billion, compared to market expectations of $1.5 billion. Adjusted earnings per share was $0.82, beating the $0.67 forecast. This was on a 190 basis point margin growth from selling products at full price, lower freight costs, and tighter control on expenses.

In recent years, the luxury industry has seen a slowdown in the growth of lower price points, while more exclusive tastes such as Hermès have become a force in the market.

Last month, Kering, one of France’s giant conglomerates, revealed that it expects a 40%-45% decline in operating income for the first half of the year. This was due to a sharp decline in first-quarter sales for the group’s flagship Gucci brand.