Title: Tapestry Projects Lower Profit and Sales for FY2024 Amid Declining U.S. Demand for Luxury Handbags
Subheading: Rising cost of living and inflation puts pressure on accessible luxury segment, says CEO
In a challenging market for luxury retailers, Tapestry, the parent company of Coach, has projected lower-than-expected profit and sales for fiscal year 2024. The decline in demand is primarily attributed to a decrease in U.S. consumer interest in luxury handbags, which has affected the company’s revenues.
Tapestry joins the league of luxury fashion brands, including Ralph Lauren, LVMH, Gucci-owner Kering, and Canada Goose, all citing North America’s tough consumer backdrop. According to industry experts, the increased cost of living and high inflation have influenced American budgets, leading to a decline in demand for the “accessible luxury” segment.
Notably, Tapestry’s bestselling handbag, the Tabby, is priced at $450 on its U.S. site. In contrast, a similar product from Dior sells for $3,800, highlighting the cost differences that may be influencing consumer choices. Tapestry CEO, Joanne Crevoiserat, acknowledges that the lower-income demographic has become more selective with their purchases.
However, despite these challenges, Tapestry anticipates a rebound in demand from the highly profitable Chinese market. This projection provides hope for future growth and recovery for the luxury fashion brand.
Over the past year, Tapestry’s sub-brands, Kate Spade and Stuart Weitzman, have experienced a decline in sales by 10% and 13%, respectively. This can be attributed to their higher exposure in the North American market, which has been significantly impacted by the declining demand for luxury goods.
Conversely, Tapestry’s flagship brand, Coach, has witnessed a 5% growth in sales during the reported quarter, due to its relatively lower exposure to the struggling North American market. To capitalize on the upcoming holiday season, Tapestry executives plan to focus their marketing efforts and inventory on core products, specifically the Tabby handbag.
In recent news, Tapestry announced its acquisition of rival Capri, the owner of Michael Kors, in a deal valued at $8.5 billion. This strategic move aims to strengthen Tapestry’s position in the luxury fashion industry and boost its market presence.
Amidst these developments, Tapesty’s adjusted earnings for fiscal year 2024 are expected to range from $4.10 to $4.15 per share, slightly below earlier estimates. Similarly, the company’s net sales forecast falls slightly short of expectations.
Furthermore, Tapestry’s fourth-quarter adjusted per-share profit was 78 cents, missing the anticipated figure of 97 cents. Notably, the strong U.S. dollar has also impacted the company’s profitability, a common issue faced by U.S.-based brands and retailers expanding into overseas markets.
Despite the challenges faced by Tapestry, the company remains determined to navigate the luxury market landscape, leveraging the recovery in Chinese demand and emphasizing core product lines in their marketing strategies to bolster sales.
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