Coach parent Tapestry forecasts weak 2024
Coach parent Tapestry (TPR.N), which agreed to buy Capri (CPRI.N) last week, forecast fiscal 2024 profit and sales below estimates on Thursday after waning U.S. demand for its luxury handbags hurt fourth-quarter results.
The company also joined luxury rivals Ralph Lauren (RL.N), LVMH (LVMH.PA), Gucci-owner Kering (PRTP.PA) and Canada Goose (GOOS.TO) in pointing to a challenging consumer backdrop in North America.
Increased cost of living and still-high inflation has pressured American budgets, affecting companies such as Tapestry in the “accessible luxury” segment – where customers occasionally buy goods priced between $300 and $800, but are more sensitive to the cost of essentials.
Coach’s best-selling Tabby handbag sells for $450 on the company’s U.S. site, while a comparable product from Dior sells for $3,800.
“The lower income cohort is under pressure,” and is being more choosy, CEO Joanne Crevoiserat said on a post-earnings call.
However, Tapestry said it expects to benefit from a recovery in demand from the “highly profitable region” of China this fiscal year.
In the reported quarter, revenues from its Kate Spade and Stuart Weitzman brands dropped 10% and 13% over the last year. TD Cowen analyst Oliver Chen attributed the weakness at Kate Spade partly to its higher exposure in North America.
Sales of Coach, which has less exposure to the volatile North American market, grew 5% over the quarter. Executives said the company would focus marketing and inventory in the key holiday season on core products such as the Tabby handbag.
“Managing the amount of evergreen or never out-of-stock iconic product — that’s where you get efficiency, that’s where you get deeper engagement with customers, and that’s our strategy,” CFO Scott Roe said in a post-conference interview.
