Coach CEO says U.S. in "consumer recession"
NEW YORK (Reuters) - Consumers in the United States are already acting as if they were in a recession despite what economic indicators show and would benefit from a tax stimulus package, Coach Inc's (COH.N) chief executive said on Wednesday.
"My own view is that we're already in a consumer recession," Coach Chief Executive Lew Frankfort told Reuters. "It may not be indicated overall within the GDP but consumers are behaving as if we're in a recession."
Coach saw quarterly U.S. sales of its high-end handbags hurt as people not only stayed away from malls, but were more careful with their spending. The company cut its sales outlook for the second half of fiscal 2008, which began in July, due to the North American retail environment.
Frankfort said Coach is now targeting 17 percent sales growth for the back half of the fiscal year, instead of 19 percent as previously anticipated.
That would still outperform the wider handbag market, whose growth Frankfort said is expected to slow -- in proportion to other consumer categories -- to about 10 percent in the first half of calendar 2008, down from prior growth rates in the 15 percent to 20 percent range.
Frankfort said interest-rate cuts, such as the U.S. Federal Reserve's unexpected 75-basis-point cut in the fed funds rate on Tuesday, could raise consumer confidence but were unlikely to boost spending in the near term.
"The discount rate doesn't change one person's shopping behavior. What it does do though, is provide Wall Street and the consumer with some level of confidence that the government is not ignoring the situation," Frankfort said. "It raises hope for stronger government intervention."
Last week President George W. Bush called for a package of tax cuts and other measures totaling 1 percent of gross domestic product -- roughly $140 billion -- to help shore up the U.S. economy, which has been battered by a deteriorating housing market, a credit crisis and surging oil prices.
Frankfort said such tax stimulus packages have been successful at spurring spending in the past and he sees no reason why it would not work again.
"We do need a tax stimulus package to restore confidence in consumers that they will have some additional discretionary money that they would otherwise not expect," Frankfort said, using words like "rattled" and "scary" to describe U.S. consumers.
"To the extent that the government comes in and provides a level of reassurance, either by helping consumers secure property loans as needed or to lower tax burdens, it will be an offset," Frankfort said. "The question is: will it be enough?"
(Reporting by Martinne Geller, editing by Gerald E. McCormick and Maureen Bavdek)
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