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Coach shares plunge on tough holiday quarter

Published on NewsOK Modified: January 23, 2013 at 7:03 pm •  Published: January 23, 2013

"Most broadly, the consumer was impacted by a muted macroeconomic environment, while in the women's handbag category competition intensified and promotional activity increased," he added. He noted that despite a heavy promotional environment, Coach didn't succumb to the pressure and stuck with its pricing strategy to protect the brand.

Total North America sales rose 1 percent to $1.08 billion from $1.07 billion in the year-ago period. North American direct sales rose 2 percent for the quarter. Revenue at stores opened at least a year fell 2 percent. The measure is considered a key indicator of a retailer's health.

International sales rose 12 percent to $411 million from $368 million a year ago. Results in China remained strong, with total sales rising 40 percent and revenue at stores opened at least a year rising at a double-digit rate. In Japan, sales declined 2 percent on a constant currency basis.

Frankfort said China was on course to generate at least $400 million in sales this year. He also said that the company's men's business is on track to generate sales of more than $600 million globally for the current year, up 50 percent from a year ago.

But analysts say Coach needs to better respond to rivals.

"(Coach's) share losses in the U.S. are accelerating, which we expect to continue while large competitors continue the rapid square footage" expansion, wrote Michael Binetti, a UBS retail analyst in a note published Wednesday.

Brian Sozzi, chief equities analyst at NBG Productions, noted that during his trips to the malls during the holiday shopping season he noticed that Michael Kors stores were packed while Coach stores were not.

"Coach's product looked straight up stale, and the soft traffic reflected that," he added.