Bus owner Tapestry curtails profit prospects as China blocks demand

Customers pass a bus shop at the Shanghai New World Daimaru department store on August 12, 2019 in Shanghai, China.

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Owner of the coach Tapestry Thursday reduced its profit outlook for fiscal year 2022 with blocks in China poised to dent consumer demand for its high-end bags and accessories.

The dealer now sees his annual earnings at $ 3.45 per share, compared to a previous estimate of between $ 3.60 and $ 3.65 per share. He said the new guide includes an expected headwind of 25 cents to 30 cents due to Covid-related pressures in China.

The tapestry comes together a growing list of companies, from Apple to Estee Lauder, who reported the impact of China’s Covid controls on their businesses. Since March, mainland China has been battling an outbreak of the omicron variant by addressing rapid blockages and travel restrictions. This not only hurts demand in the region but also fractures production.

However, Tapestry shares were up about 3% in pre-market trading as the retailer’s third-quarter fiscal profits and revenues exceeded Wall Street expectations, fueled by double-digit sales growth in North America.

The company said in a press release that it has “healthy grassroots 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. According to a Refinitiv poll, analysts were looking for earnings per share of 41 cents on sales of $ 1.42 billion.

Sales in North America were up 22 percent 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 be approximately $ 6.7 billion, which would represent a percentage increase in teens over fiscal 2021. Analysts expect revenue of approximately $ 6.75 billion.

Tapestry shares are down around 35% this year as the market closes on Wednesday.