Nov 6 (Reuters) -

Tapestry's efforts to protect margins against

tariffs, a leaner Kate Spade product line and strong Gen-Z

demand for Coach's Tabby handbags helped the company lift its

annual profit and sales targets on Thursday.

Affordable luxury companies are leaning into demand

from wealthier Gen-Z consumers who are spending selectively on

nice-to-have things, while companies serving more low-income

shoppers are seeing a pullback due to economic uncertainty and

issues such as the return of student loan repayment.

Tapestry and apparel companies such as Under Armour ( UAA )

and Ralph Lauren ( RL ) are doubling down on more premium

positioning and full-price sales to protect margins.

Tapestry, which imports from tariff-hit countries such

as India, Vietnam and Cambodia, has also navigated pressures

from the levies without price hikes, helped by demand for its

higher-margin Tabby bags that retail for up to $750, CEO Joanne

Crevoiserat told Reuters.

While North America still makes up a majority of its total

sales, Tapestry is also trying to drive more demand in key

markets such as China, where sales rebounded to 19%, and Europe,

which saw a 32% jump in the quarter.

The company raised its annual margin target and reported a

200-basis-point rise in adjusted operating margins in the first

quarter. It stuck to its earlier expectation of a roughly 230

basis points impact on its annual operating margin from tariffs.

Sales at Coach, which makes the Tabby shoulder bags and

accounts for nearly 85% of Tapestry's total revenue, jumped 21%

on a constant currency basis, following a 13% rise in the prior

three-month period.

At Kate Spade, where sales have fallen for nearly three

years, Tapestry is cutting the number of handbags it offers by

about 30%, but is investing in fresher product lines such as the

cross body bags in its fall collection this year, priced at over

$300.

In the reported quarter, net sales dropped 9% at Kate Spade,

but improved sequentially.

"We're being disciplined on discounting (at Kate Spade). We

know that erodes brand health and brand desire, and we know that

will impact the top line, but we're ... taking the steps

necessary to reset the foundation of the brand," CEO Crevoiserat

said.

The company now expects adjusted earnings per share for

fiscal 2026 in the range of $5.45 to $5.60, compared with its

earlier target of $5.30 to $5.45.

Excluding the Stuart Weitzman brand, which it sold to

Caleres ( CAL ) earlier this year, Tapestry expects revenue

growth of 7% to 8%, above its earlier target of an increase at a

mid-single-digit rate.

Quarterly net sales came in at $1.70 billion, beating

estimates of $1.64 billion, according to data compiled by LSEG.

Adjusted earnings per share of $1.38 also surpassed

estimates of 1.26.

(Reporting by Juveria Tabassum in Bengaluru; Editing by Devika

Syamnath)