Q3 gross margin growth of 190 bps drives EPS beat
Expects Q4 EPS of 85 cents vs estimates of 1.01
Company39;s shares down 2 in early trading

May 9 Reuters Coach handbag maker Tapestry cut its annual sales forecast and missed thirdquarter revenue estimates on Thursday, signaling weak demand for its tote bags and accessories in North America and China.

Shares of the Kate Spade owner fell 2 as the company also forecast fourthquarter profit below expectations.

Reduced discretionary spending in North America owing to rising prices and a fragile postpandemic recovery in China have led to weak demand for Tapestry39;s leather handbags and footwear brands.

Consumer confidence is low in North America, likely impacted by sticky inflation. And so we are seeing an overall more cautious consumer, CEO Joanne Crevoiserat said.

Revenue in North America, which accounted for 61 of 2023 revenue, fell 3 in the quarter, while sales in Greater China dipped 2.

It will take time for sales in mainland China to recover but brands may be able to benefit from rebounding demand for international travel, said Rachel Wolff, an analyst with Emarketer.

Still, Tapestry beat profit expectations on a 190 basis point margin growth from selling products at full price, lower freight costs and tighter control on expenses.

Tapestry39;s 8.5 billion buyout of Michael Kors owner Capri is being sued by the antitrust regulator, saying it would eliminate direct headtohead competition between the…