Tapestry, the parent company behind Coach and Kate Spade, raised its full-year outlook after a strong first quarter that showed the Coach brand continuing to gain momentum while Kate Spade kept losing ground.
The New York-based handbag group said Coach sales rose 16% during the quarter, while revenue in China jumped 43%. That strength helped offset a 10% decline at Kate Spade, which has been struggling to find its footing in a competitive accessories market.
Tapestry's overall sales rose 11.1% to $1.89 billion, and adjusted earnings came in at $1.82 per share, beating Wall Street's expectation of $1.57, according to LSEG data cited by Reuters. The company lifted its annual profit and revenue forecast, signaling confidence that the momentum can continue.
What's driving Coach's growth?
Management credited Coach's popularity in North America, where the brand has been attracting younger and higher-income shoppers. That's notable because much of the luxury industry has seen demand cool recently, with consumers pulling back on discretionary spending amid higher interest rates and lingering inflation.
Coach has leaned into a strategy of refreshing its classic designs, expanding its leather goods assortment, and marketing to a broader audience. The brand's ability to draw in new customers while keeping its core base has made it a standout in Tapestry's portfolio.
The strong performance in China is also a bright spot. Chinese consumers have been a key driver for global luxury brands, and a 43% jump in revenue suggests Tapestry is benefiting from a recovery in that market, even as other companies report mixed results there.
Why Kate Spade is struggling
Kate Spade's 10% sales decline is a reminder that not all of Tapestry's brands are firing on all cylinders. The brand, known for its colorful bags and playful aesthetic, has faced stiff competition from both higher-end labels and more affordable fast-fashion players.
Kate Spade has also struggled to define its identity in a crowded market. While Coach has successfully repositioned itself as a premium yet accessible brand, Kate Spade has had a harder time standing out. Tapestry has been working to refresh Kate Spade's product lineup and marketing, but the turnaround is taking time.
For investors, the contrast between Coach and Kate Spade highlights the importance of brand strength in the fashion industry. A single hit brand can carry a company, but a weak one can drag on overall results.
What it means for investors
Tapestry's raised outlook is a positive signal, especially in a climate where many consumer companies are warning about softer demand. The company's ability to beat expectations and lift its forecast suggests that its strategy is resonating with shoppers.
However, the continued weakness at Kate Spade is a risk. If the brand doesn't recover, it could weigh on future results and limit the upside from Coach's success. Investors will likely watch for signs that Kate Spade is stabilizing in the coming quarters.
Tapestry's performance also offers a broader lesson: in the luxury and accessories space, brand momentum can be uneven. Companies with a strong portfolio can offset weakness in one label with strength in another, but that balance isn't guaranteed.
For everyday investors, this news is a reminder to look beyond headline numbers and consider how different parts of a company are performing. A company can beat expectations overall while still having trouble spots that may matter down the road.
Tapestry's next earnings report will be closely watched to see if Coach's growth continues and whether Kate Spade shows any signs of improvement. Until then, the company's raised outlook gives investors a reason for cautious optimism.
