Coach Declines After North American Holiday Sales Tumble

NEW YORK, United States — Coach Inc., the largest U.S. luxury handbag maker, fell in early trading after saying sales at North American stores dropped twice as much as analysts' estimated during the holiday shopping season.

The shares dropped 7.1 percent to $48.82 at 9:50 a.m. in New York, after the retailer also reported quarterly profit and revenue that trailed analysts’ projections. The stock earlier slipped 7.9 percent, the biggest intraday slide since Oct. 22.

Coach’s results, which were also hurt by competition in the handbag segment, came in a holiday season that saw many U.S. retailers resorting to profit-eroding promotions to draw reluctant shoppers. Sales at North American stores open at least a year fell 14 percent in its fiscal second-quarter as shoppers’ mall visits declined. Analysts had projected a 6.8 percent drop on average, according to researcher Retail Metrics.

“The comparable sales were much worse than anticipated,” Corinna Freedman, an analyst with Wedbush Securities in New York, said in a phone interview today. “They are blaming weak traffic, which we agree. The weather was also really bad. The outlet channel, which drives more profit, is where traffic was really soft.”

Freedman rates the shares neutral, the equivalent of hold.

Net income in the three months ended Dec. 28 dropped 16 percent to $297.4 million, or $1.06 a share, from $352.8 million, or $1.23, a year earlier, New York-based Coach said today in a statement. The average of 30 analysts’ estimates compiled by Bloomberg was $1.11. Revenue fell 5.6 percent to $1.42 billion, trailing the $1.48 billion average estimate.

Coach warned in November that its customers planned to spend 4 percent less during the important year-end season. Chief Executive Officeer Victor Luis, who assumed his post earlier this month, is turning Coach into a lifestyle brand by adding new bags, fashion shoes, outerwear and other accessories. He has revamped its design team, which in February is unveiling in its first runway show a new collection for the fall season.

The shares advanced 1.1 percent last year, compared with a 30 percent jump for the Standard & Poor’s 500 Index.

By Cotten Timberlake; Editors: James Callan, Kevin Orland, Robin Ajello