TPR Tapestry Inc

Michael Kors Holdings Ltd. said results in its latest quarter weren't as bad as it had predicted, though the handbag retailer warned that dwindling mall traffic and lower tourism in some cities would continue to hurt sales.

Shares fell 3% in premarket trading.

Chief Executive John Idol said that the company saw solid growth in its North American flagships while beefing up its presence in Asia, "however, this progress was muted by the continued decline in mall traffic trends as well as a decrease in tourism in certain major cities which negatively impacted our comparable sales performance during the quarter."

Like its rivals, Kors has contended with a slowdown in purse and watch sales worsened by shoppers' shift to online retailers like Amazon.com and away from malls. It has also struggled with profit-eating promotional pricing that has resulted in overexposure, and the strong U.S. dollar's negative effect on tourist spending and international pricing hasn't helped. Analysts at Credit Suisse noted late last month that Kors is pulling back on wholesale distribution of handbags at Macy's and Nordstrom, "an appropriate move to help protect brand equity long term, but [we] believe this adds risk to revenue."

Rival Coach Inc. said Tuesday that would slash its business with department stores by about a quarter, part of an effort to wean customers off discounts. Coach said sales at existing North American stores grew for the first time in more than three years in the most recent quarter.

For Kors, comparable-store sales dropped 7.4% during the June quarter. Wholesales sales fell 7% while licensing revenue tumbled 21%.

While results came in better than the company had warned in June, Kors signaled that September quarter results are on track to disappoint. For the current quarter, the retailer predicts 84 cents to 88 cents in per-share profit on sales of $1.07 billion to $1.085 billion, short of the $1.03 a share and $1.11 billion in sales analysts have predicted.

For the full year, Kors backed its view, forecasting $4.56 to $4.64 an adjusted share. Revenue will be flat from a year earlier, Kors reiterated, with comparable-store sales down in the mid-single digit range.

In all for the three months ending in June, the company reported a profit of $147.1 million, or 83 cents a share, down from a year-earlier profit of $174.4 million, or 87 cents a share. Revenue edged up 2% to $987.9 million.

Analysts projected 74 cents in earnings per share and $953.0 million in sales, according to Thomson Reuters. The company had said it anticipated 62 cents to 66 cents in adjusted earnings per share and $940 million to $950 million in revenue.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

August 10, 2016 08:45 ET (12:45 GMT)

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