May 12 (Reuters) – Tapestry (TPR.N) on Thursday signaled strict COVID-19 curbs in China were drying up orders for its luxury handbags and apparel in the fashion world's key growth market, prompting the Kate Spade owner to lower its annual profit projection.
The dour view follows similar warnings from Gucci owner Kering SA (PRTP.PA) and Ray-ban maker EssilorLuxottica (ESLX.PA) and underlines the toll of Beijing's zero-COVID policy that has also clogged highways, stranded workers and shut factories. read more
Tapestry is especially vulnerable to the crisis as most of its Coach and Kate Spade merchandise is produced by manufacturers in Asia, particularly Vietnam and mainland China.
The company expects full-year profit of $3.45 per share, compared with its prior estimate of $3.60 to $3.65 a share. It also faces higher costs as China lockdowns worsen a supply chain crisis that has dogged the industry for more than a year.
Sales in mainland China fell by a mid-teens percentage in the third quarter ended April 2.
But higher prices and resilient demand for luxury goods in North America helped Tapestry overcome that hit to post a 13% jump in net sales to $1.44 billion. The figure beat the average analyst expectation of $1.42 billion, according to Refinitiv IBES data.
European luxury peers such as Louis Vuitton owner LVMH (LVMH.PA), which manufacture the bulk of their products in their home markets, have also benefited from North America demand to post strong sales increases.
Tapestry earned a profit of 51 cents per share on an adjusted basis, beating estimates of 41 cents.
Reporting by Uday Sampath in Bengaluru; Editing by Aditya Soni
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