Coach parent Tapestry (TPR.N) raised its annual profit forecast on Thursday, betting on full-price sales of its premium handbags as well as early signs of a demand recovery in key market China.
Shares of the Kate Spade bags maker were up about 9% in early trading after strong international growth helped it beat sales estimates in the crucial holiday quarter.
Sentiment improved in Greater China from last year's COVID-related impact, echoing trends seen at other luxury retailers like Ralph Lauren (RL.N), Canada Goose (GOOS.TO) and Christian Dior owner LVMH (LVMH.PA).
After a softer start to the year owing to cautious spending in North America, the company saw its sales in China and Europe rising 19% and 11%, respectively, in the quarter.
"We've continued to see an uptick in travel spend from Mainland China tourist, with increases across Asia and Europe," CFO Scott Roe said.
Earlier in the day, Ralph Lauren posted upbeat quarterly results, partly due to a strong rebound in China.
"Personal luxury sales in China are expected to grow... as affluent consumers continue to open their wallets - a trend which should enable Tapestry to retain its momentum in the country," Insider Intelligence analyst Rachel Wolff said.
Revenue at Tapestry's Coach brand rose 6%, boosted by a near-doubling in sales of its Tabby handbags over last year. This offset declines of 6% and 4%, respectively, in its Kate Spade and Stuart Weitzman brands.
CEO Joanne Crevoiserat indicated in a post-earnings call that further pricing improvements were planned this year.
Net sales rose to $2.08 billion in the second quarter ended Dec. 31, edging past analysts' average estimate of $2.06 billion, according to LSEG data. Easing freight costs helped margins expand by 300 basis points.
It now expects fiscal year 2024 adjusted earnings per share of $4.20 to $4.25, compared to $4.10 to $4.15 per share it forecast earlier.
Tapestry said its planned $8.5-billion buyout of Michael Kors owner Capri (CPRI.N) was on track as it gears up for tough competition in the global luxury market.
