Tapestry Inc. shares jumped the most since November after the high-end retailer raised its full-year earnings outlook, citing more moderate currency headwinds and a sales pickup in China.
(Bloomberg) — Tapestry Inc. shares jumped the most since November after the high-end retailer raised its full-year earnings outlook, citing more moderate currency headwinds and a sales pickup in China.
The Coach owner now sees earnings per diluted share in the range of $3.70 to $3.75. That’s up from its previous range of $3.60 to $3.70 and above the average estimate compiled by Bloomberg of $3.65. While sales in the most recent quarter fell sharply in China as expected, executives said they are currently seeing a strong rebound.
The company expects revenue of $6.6 billion in the current fiscal year, in line with estimates and at the higher end of a previous range of $6.5 billion to $6.6 billion.
Tapestry reported revenue in the three months that ended on Dec. 31 of $2.03 billion, roughly in line with analysts’ estimates. The company also beat forecasts for its gross margin, which came in at 68.6% versus an estimate of 67.7%, on lower freight expenses.
The shares rose 6.4% at 11:14 a.m. in New York. The stock has risen 20% for the year so far.
“Tapestry’s beat and raise is unusual in an earnings season that’s been challenged by a weaker wholesale environment and struggles in China,” Bank of America Securities Inc. analyst Lorraine Hutchinson wrote in a research note.
The results contrast with those of Capri Holdings Ltd., the owner of the Michael Kors and Versace brands, which on Wednesday reported sales that fell short of estimates and forecast weaker-than-expected growth for the current quarter and coming fiscal year, dragged down by department-store sales. Capri executives also said they would pause price increases on concern that they’re hampering consumer demand.
By contrast, Tapestry said it is likely to continue to raise prices. “We continue to see opportunity as we move forward to drive average unit retail up,” Tapestry Chief Executive Officer Joanne Crevoiserat said in an interview. Executives said they haven’t seen any resistance to price increases.
Ralph Lauren Corp. also plans to continue to seize on improving brand cachet to raise prices, although at a more moderate pace than in the past year, CEO Patrice Louvet said.
Read more: Ralph Lauren will keep raising prices on solid demand
Globally, the Coach owner only generates about 10% of revenue from the wholesale channel.
At Ralph Lauren, around one-third of sales are via department stores globally. “Our wholesale partners are being prudent on inventory,” Louvet said.
Capri, meanwhile, aims to have wholesale revenue represent 23% of sales in the coming fiscal year, which is set to begin around early April — down from 27% in the current fiscal year ending in late March.
(Updates with shares and additional details starting in first paragraph.)
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