By Suzanne Kapner and Erin McCarthy
Coach Inc.'s sales plunged in the first three months of the
year, as U.S. shoppers took their foot traffic and dollars to
Michael Kors and other rivals.
The maker of handbags and other accessories said profit fell 20%
amid a steep drop in sales in North America. Sales will continue to
fall through the rest of the year, the company said.
While Coach has been working to revamp its product line for fall
with new designer Stuart Vevers, it was unwilling to say when sales
might improve. The company is trying to expand from being a maker
of accessories--mainly handbags--into a full lifestyle brand with
apparel and shoes as well. Chief Executive Victor Luis said the
transformation would take a number of years.
Coach shares were down 8.5% in midday trading Tuesday, extending
a decline that has left them down nearly 18% so far this year.
Earnings for the fiscal third quarter fell to $190.7 million
from $238.9 million a year earlier. Overall sales slid 7.4% to $1.1
billion.
The company has tried to cut back on discounts and has added
higher priced products to try to improve its image, but it
continues to lose market share to Michael Kors Holdings Ltd. and
Kate Spade & Co.. Sales of women's handbags were particularly
weak, even as the overall market for the product continued to grow,
the company said.
The men's collection and international sales were a bright spot.
International sales rose 14% to $441 million, excluding currency
impacts. Factoring in foreign-exchange rates, international sales
grew 20%.
"China results remained resilient with total sales growing over
25% and comparable store sales rising at a double-digit rate," Mr.
Luis said.
Sales in North America fell 18%. Coach expects North American
sales to show similar declines in its fourth quarter.
Even has Coach adds pricier products like $600 handbags, it
continues to open outlet stores, which left some analysts confused
about how the company is trying to position itself. Mr. Luis said
the outlet channel has been showing "vibrancy." He said "the full
price channel in general, especially in the U.S. market, suffering
much more dramatically from traffic trends."
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Erin
McCarthy at erin.mccarthy@wsj.com
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