Coach owner Tapestry cuts profit outlook as China lockdowns dent demand

Customers walk past a Coach store at Shanghai New World Daimaru department store on August 12, 2019 in Shanghai, China.VCG | Visual China Group | Getty ImagesCoach owner Tapestry on Thursday trimmed its profit outlook for the fiscal year 2022 with lockdowns in China poised to dent consumer demand of its high-end purses and accessories.The retailer now sees its annual earnings amounting to $3.45 per share, compared with a prior estimate of between $3.60 and $3.65 a share. It said the new guidance includes an expected headwind of 25 cents to 30 cents due to Covid-related pressures in China.Tapestry joins a growing list of companies, from Apple to Estee Lauder, that have flagged the impact of China’s Covid controls on their businesses. Since March, mainland China has battled an outbreak of the omicron variant by turning to swift lockdowns and travel restrictions. Not only does this hurt demand in the region, but it also fractures manufacturing.Tapestry said Thursday that it anticipates lockdowns in Shanghai will be lifted at the beginning of June, followed by gradual improvements thereafter.Still, Tapestry shares rose about 3% in premarket trading as the retailer’s fiscal third-quarter profits and revenue came in above Wall Street’s expectations, fueled by double-digit sales growth in North America.The company said in a press releases that it has “healthy underlying momentum” in the rest of the world outside of China. In addition to Coach, Tapestry also owns Kate Spade and Stuart Weitzman.Tapestry reported adjusted earnings for the three-month period ended April 2 of 51 cents per share, on revenue of $1.44 billion. Analysts had been looking for earnings per share of 41 cents on sales of $1.42 billion, according to a Refinitiv survey.Sales in North America rose 22% in the quarter from a year earlier, fully offsetting a mid-teens decline in China, the company said.For the year, Tapestry expects revenue to total about $6.7 billion, which would represent a high-teens percentage jump from fiscal 2021. Analysts expect revenue of about $6.75 billion.Tapestry shares are down about 35% this year, as of Wednesday’s market close.

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