Tapestry shares soar as demand for Tabby bags drives upbeat forecast

By Savyata Mishra

(Reuters) -Tapestry on Thursday raised its annual sales and profit forecast, as its pricey Tabby bags remain a big draw among shoppers in North America, Europe and China, sending its shares surging 16% in early trading.

The New York-based firm also posted better-than-expected second-quarter results as sales of its Coach brand rose 10% on a constant currency basis, aided by full-price sales of its handbags.

Tapestry's Coach Tabby handbags have become a trending topic among social media influencers on apps such as TikTok for their soft and plush feel, attracting the attention of younger shoppers.

"Coach continues to generate desire among its target consumer with fresh and appealing handbag designs, while creativity has been generally lacking among luxury brands of late," eMarketer analyst Sky Canaves said.

Quarterly gross margins at Tapestry expanded 280 basis points, helped by higher average unit price and lower freight costs.

Across regions, Europe stood out with a 45% sales growth, while North America and Greater China markets saw a 4% and 3% rise, respectively.

Strong demand in North America also drove sales for luxury peer Ralph Lauren and Louis Vuitton-owner LVMH.

In contrast, rival Michael Kors' Capri gave a weak forecast on Wednesday as it grapples with a turnaround plan following a failed $8.5 billion merger deal with Tapestry last year.

Tapestry posted net sales of $2.20 billion for the quarter ended Dec. 28, compared with analysts' estimates of $2.11 billion, according to data compiled by LSEG.

It earned $2 per share on an adjusted basis, beating estimates of $1.75.

The company now expects revenue of more than $6.85 billion for the fiscal year 2025 from its prior target of $6.75 billion.

Earnings per share is forecast in the range of $4.85 to $4.90, compared with its prior expectation of $4.50 to $4.55.

(Reporting by Savyata Mishra in Bengaluru; Editing by Anil D'Silva)