Coach handbag maker Tapestry posted third-quarter revenue below Wall Street expectations on Thursday as demand for its handbags and accessories continued to falter in the face of high inflation.

Tapestry’s net sales came in at $1.48 billion in the quarter ended March 30, compared to analysts’ average estimate of $1.50 billion, according to LSEG data.

The company’s proposed $8.5 billion buyout of Michael Kors owner Capri is facing hurdles as the US Federal Trade Commission has sued to block it on grounds that the deal would eliminate “direct head-to-head competition” between the flagship brands of the two luxury handbag makers.

By Savyata Mishra; Editing by Arun Koyyur

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Is the FTC Really Going to Stop Tapestry and Capri From Merging?

Blocking the deal would set a new precedent for fashion M&A in the US and leave Capri Holdings in a precarious position as it attempts to turn around its Michael Kors brand.