By Savyata Mishra
(Reuters) -Coach parent Tapestry (NYSE:TPR) raised its annual profit forecast on Thursday, betting on full-price sales of its premium handbags and early signs of a demand recovery in key market China.
Tapestry's shares closed 6.5% higher after the company also topped sales estimates in the crucial holiday quarter.
Sentiment has improved in Greater China since last year's COVID-related impact, echoing trends seen at luxury retailers Ralph Lauren (NYSE:RL), Canada Goose and Christian Dior owner LVMH.
After a softer start to the year owing to cautious spending in North America, Tapestry saw its sales jump 19% in China and 11% in Europe in the second quarter.
"We've continued to see an uptick in travel spend from Mainland China tourist, with increases across Asia and Europe," CFO Scott Roe said.
Ralph Lauren also posted upbeat quarterly results.
"Personal luxury sales in China are expected to grow... as affluent consumers continue to open their wallets - a trend which should enable Tapestry to retain its momentum in the country," Insider Intelligence analyst Rachel Wolff said.
Second-quarter revenue at Tapestry's Coach brand rose 6%, as sales of its Tabby handbags nearly doubled over last year. This offset declines in its Kate Spade and Stuart Weitzman brands.
CEO Joanne Crevoiserat on a post-earnings call indicated plans for further pricing improvements this year.
Tapestry's net sales rose to $2.08 billion in the quarter ended Dec. 31, above LSEG estimate of $2.06 billion. Easing freight costs helped margins expand by 300 basis points.
It now expects 2024 adjusted earnings per share of $4.20 to $4.25, compared with its earlier forecast of $4.10 to $4.15.
However, Capri, which is being bought by Tapestry, missed third-quarter revenue and adjusted profit estimates.
Capri's shares fell nearly 2% in extended trade after its gross profit margin decreased from a year earlier due to lower full-price sales.