Coach, Ralph Lauren sales boosted by big spending young shoppers

By Deborah Mary Sophia and Uday Sampath Kumar

(Reuters) -Tapestry Inc on Thursday raised its annual profit outlook and said it sees more room for price hikes after strong demand for its Coach handbags from Gen Z and millennial shoppers powered a quarterly earnings beat, sending its shares up 6%.

Younger shoppers snapping up its sweatshirts, knitwear and Polo line of products also drove results beat at luxury peer Ralph Lauren Corp. Shares of the company climbed 4%.

The results are a sharp contrast to disappointing earnings and forecasts from rival Capri Holdings a day earlier that cast a shadow on luxury retailer earnings.

“The Coach brand has done a lot of work to reposition itself as a premium brand that appeals to a younger consumer,” Raymond James analyst Rick Patel said.

“Tapestry appears to be executing better for its Coach brand than Capri is for Michael Kors,” Patel added.

New York-based Tapestry, which also owns the Stuart Weitzman brand, said nearly half of the about 2.6 million new customers it added in North America were Gen Z and millennials.

Shoulder bags from Tapestry’s Tabby and Willow collections, which typically cost between $300 and $600 per piece, were in vogue among its younger customers in the quarter, company executives said.

Tapestry is also more insulated from a slowdown in demand at North American department stores felt by Michael Kors owner Capri and others, analysts have said, as the focus on own retail channels has helped tap into still strong consumer spending.

Tapestry forecast fiscal 2023 earnings of $3.70 to $3.75 per share, compared with its prior estimate of $3.60 to $3.70.

It reported a profit of $1.36 per share in the second quarter, topping estimates of $1.27, according to Refinitiv IBES data.

Net revenue at Ralph Lauren rose 1% to $1.83 billion in the third quarter ended Dec. 31, beating estimates of $1.76 billion.

Both Tapestry and Ralph Lauren took a hit in China due to a resurgence of COVID-19 infections, but demand is returning, the companies said.

(Reporting by Uday Sampath and Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila)