By Everdeen Mason
Coach Inc. said its fiscal second-quarter earnings dropped 16%
as the handbag-and-accessories retailer's North American business
continued to falter, offsetting growth in other segments.
Coach shares fell 6.8% to $49 in premarket trading as results
missed expectations. As of Tuesday's close, the stock is down 13%
in the past 12 months.
"We continued to be disappointed by our performance in North
America, which was impacted by substantially lower traffic in our
stores and by our decision to limit access to our e-factory flash
sales site," said Chief Executive Victor Luis, who succeeded Lew
Frankfort this month as planned.
Weak North American sales masked strength in its men's and
footwear lines, as well as its emerging Asian and European
markets.
In the latest quarter, sales in North America fell 9% to $983
million. International sales, excluding currency impacts, rose 11%
to $425 million, including 25% growth in China. Including
foreign-exchange rates, international sales edged up 2%.
The company has been adding categories and expanding in online
sales, men's collections and overseas as it faces challenges from
rivals such as Michael Kors Holdings Ltd., Fifth & Pacific Cos.
Inc.'s Kate Spade brand and Tory Burch.
Coach has also been in the midst of a top management transition,
with Mr. Luis's succession to CEO and the departures of its North
American group president and chief operating officer in July.
Additionally, the handbag maker parted ways last year with its
executive creative director, Reed Krakoff, who was leading a group
that has agreed to buy his namesake brand from Coach.
For the period ended Dec. 28, Coach reported earnings of $297.4
million, or $1.06 a share, versus $352.8 million, or $1.23 a share,
a year earlier.
Revenue slid 5.6% to $1.42 billion, or 3% excluding currency
impacts.
Analysts polled by Thomson Reuters expected per-share earnings
of $1.11 and revenue of $1.48 billion.
Write to Everdeen Mason at everdeen.mason@wsj.com
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