UPDATE 1-Coach parent Tapestry raises annual profit forecast on steady China demand

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Feb 8 (Reuters) –

Coach handbags maker Tapestry raised its full-year profit forecast on Thursday, betting on a demand recovery in China for its handbags and leather goods.

Shares of the Kate Spade handbags maker were up 4% before the bell after it also beat second-quarter sale estimates.

After a softer start to the year owing to pressures from a demand slowdown in the U.S., the company saw a 19% jump in quarterly revenue in Greater China, joining other luxury retailers like

Canada Goose to log resilient sales.

Sales at its Coach brand, Tapestry’s main revenue churner, rose 6%, offseting declines of 6% and 4%, respectively, in its Kate Spade and Stuart Weitzman brands.

The average price of items from its Coach brand in the U.S. rose 12% in the second quarter, while promotions remained low, according to UBS, further helping the company to grow sales.

Easing freight costs and full-price selling of Tapestry’s popular Tabby shoulder bags and Dakota handbags helped margins expand by 170 basis points.

The company is in the middle of an $8.5-billion buyout of Michael Kors owner Capri and is gearing up for tough competition in the global luxury market.

Tapestry’s net sales rose to $2.08 billion in the quarter ended Dec. 31, better than analysts’ average estimates of $2.06 billion, according to LSEG data.

It now expects annual earnings per diluted share of $4.20 to $4.25, compared to $4.10 to $4.15 it forecast earlier. (Reporting by Savyata Mishra in Bengaluru; Editing by Pooja Desai)

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