By Suzanne Kapner
Coach Inc. shook up its management as sales in North America
continued to post steep declines, but the company noted progress in
its turnaround efforts.
The company elevated Andre Cohen, a longtime Coach executive who
had previously run its Asian business, to president of its North
American division replacing Francine Della Badia, who will leave
the company in February. Also departing is Stephanie Stahl, who led
global marketing and strategy. She will be replaced by David
Duplantis, who has spent 15 years with Coach, most recently
overseeing its digital strategy.
Chief Executive Victor Luis pointed to signs that his plans to
improve the company's results are working, citing increased sales
at 20 remodeled stores that showcase Coach's new image as a
lifestyle brand that includes shoes, apparel and accessories in
addition to handbags.
"Their performance was substantially better than the rest of the
fleet and provided the most compelling evidence that we are moving
in the right direction," Mr. Luis said. Coach is planning to
remodel 150 stores and open 50 to 60 new stores showcasing its
retooled image by the end of its fiscal year in June.
Even so, sales at existing North American stores plunged 22% in
the three months through Dec. 27, excluding newly opened or closed
locations. While that is a slight improvement over the 24% drop in
the October period, it is far deeper than the 13.6% drop the year
before.
Coach's results are in contrast to Kate Spade & Co., which
on Thursday released preliminary results for last year that
included a 24% sales increase at existing locations.
As part of its repositioning, Coach has greatly curtailed
promotions, which Mr. Luis said was partly to blame for the sharp
sales decline. He added, however, that the company's research
showed that by offering fewer deals, it has started to regain its
standing with consumers as a high-quality brand.
Coach has also had to fend off competition from rivals including
Michael Kors Holdings Ltd. and Tory Burch, which have leveraged the
celebrity status of their designers to win over shoppers. Coach has
responded by adding higher-quality materials and edgier
designs.
Earlier this month, Coach agreed to buy upscale shoe brand
Stuart Weitzman in a deal valued at up to $574 million, a rare
acquisition for a company that typically focuses on organic
growth.
Coach's earnings fell 38% in the period to $183.5 million from a
year earlier. Total sales fell 14% to $1.2 billion.
Analysts expressed relief that results weren't worse, but also
said Coach had a long way to go to regain its former health.
"We continue to believe it will be difficult for COH to execute
its transformation strategy," Paul Lejuez, a Wells Fargo analyst,
wrote to clients, referring to Coach by its stock symbol.
The company also faced challenges in its international business
due in part to the strength of the dollar. In Japan, sales declined
7%, excluding currency fluctuations, hurt by a consumption tax that
was instituted last year. Sales in China rose 13%.
Handbags priced over $400 now make up 30% of Coach's total
handbag sales, up from 20% a year ago, Mr. Luis said. But he added
that Coach needed to do a better job offering more basic styles,
particularly those that would be bought as gifts during the holiday
season.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
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