Parent company Tapestry, which owns Coach, predicts a sluggish 2024 due to low demand in the United States.

Coach Parent Tapestry Forecasts Lower ⁤Profit and Sales for Fiscal 2024

By⁢ Savyata Mishra, Juveria Tabassum and Katherine Masters

(Reuters) -Coach parent Tapestry, which agreed to buy Capri 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, LVMH, Gucci-owner Kering and Canada Goose 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.

Last week, Tapestry said it would buy its​ rival, Michael ‌Kors owner Capri, in a deal valued at $8.5 billion, in a bid‌ to challenge larger European competitors for​ a bigger share of the global luxury market.

Tapestry expects adjusted earnings of $4.10 to $4.15 per share in fiscal 2024, ‌compared with Refinitiv IBES estimates of $4.24.

Its⁤ net sales​ forecast ⁤was a touch shy ⁤of estimates.

The company’s adjusted per-share profit was 78 cents​ for the fourth quarter ended July 1, missing expectations of 97 cents.

“With more⁤ growth coming from overseas, ⁢Tapestry’s profitability was hurt somewhat by the strong dollar – an issue that⁤ continues to affect many U.S.-based brands and retailers,” Insider Intelligence analyst Rachel Wolff said.

(Reporting by Savyata Mishra‍ and Juveria Tabassum in Bengaluru; Kate Masters in New York; Editing by Maju Samuel and​ Devika Syamnath)

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