Tapestry stock shot up Thursday after the parent company of Coach and Kate Spade posted solid earnings and raised its financial forecasts for the year.
The company delivered 78 cents in earnings per share for the third quarter of its fiscal year, the three months that ended April 1. Analysts tracked by FactSet expected 60 cents. Revenue totaled $1.51 billion, compared with the $1.44 billion Wall Street expected.
In midday trading, shares of Tapestry (ticker:
TPR
) increased 8.5% to $40.29.
Investors have been worried that high prices would cut into demand.
Capri Holdings
(CPRI), which sells Michael Kors bags, and the French fashion house
LVMH Moet Hennessy Louis Vuitton
(
LVMH
) have both said that inflation is making high-end consumers less willing to buy. In April, LVMH reported a “severe slowdown” in the U.S., specifically with demand for its Cognac spirit segment.
But Tapestry, which also owns the Stuart Weitzman brand, is doing well with Coach, which is best known for its bags. Coach sales were up 7% in the latest quarter versus a year ago, driven by China and Gen-Z and millennial consumers. Its 1970s style bag, Tabby, is a top performer.
The hashtag related to Coach’s top handle bag has 5.5. million views on TikTok. Tapestry also said it will keep scaling up sub-brand Coach Topia, which makes bags from upcycled leather scraps.
“What we’re seeing is our strategy of focusing in on a younger Gen-Z is working,” said Coach CEO Todd Kahn in a call discussing earnings Thursday morning. And “interestingly, they are transacting at higher [prices]”
About half of the new 1.2 million North American customers Tapestry acquired in the third quarter are within the younger cohort.
Tapestry also raised its forecasts for earnings and revenue for the fiscal year. It now expects a profit of $3.85 to $3.90 a share, compared with the $3.75 it had predicted in February. Revenue growth in constant currency is estimated to be approximately 3% versus the 2% to 3% management had predicted.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
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