(Recasts throughout to add details from conference call)
By Phil Wahba
April 29 Coach Inc's North American woes
deepened last quarter as the upscale retailer continued to lose
market share and the new line of clothes, shoes and handbags it
is banking on to reverse its fortunes remained months away from
The New York-based company on Tuesday reported a 21 percent
drop in sales at North American stores open at least a year for
the three months ended March 29, its fourth straight decline.
In contrast to its booming China sales, Coach is expecting
another big decline this quarter in North America, where it gets
about 70 percent of its revenues.
Coach shares fell 9 percent to $45.91 in morning trading.
Known for its Poppy handbags, Coach has struggled to keep up
with its fast-growing affordable luxury competitors,
particularly Kate Spade & Co and Michael Kors Holdings
Ltd, whose handbags are gaining popularity.
Coach's poor U.S. sales in the quarter compared with what
Chief Executive Officer Victor Luis estimated was the industry's
"high single-digit percentage rate" increase in handbag sales.
The U.S handbag market was $7.4 billion in 2013, according
to Euromonitor International.
Last year, to win back customers, the company said it would
expand its assortment and become a so-called lifestyle brand,
with a bigger selection of shoes and clothes than before, in
addition to handbags.
It hired British designer Stuart Vevers to replace longtime
creative director Reed Krakoff.
Vevers' first collection, set to hit stores in September,
received positive reviews in the fashion press during New York
Fashion Week in February, but Luis told analysts on a call that
Coach had not tested the collection with customers.
"Good feedback from media is not the same as customers
coming in the doors - they're having trouble bringing in younger
customers," said Edward Jones analyst Brian Yarbrough.
Luis, who took the reins in January, said that up to 85
percent of items in its full-service stores would have Vevers'
imprimatur by the autumn.
There were some bright spots in Coach's results: Luis said
sales of handbags priced at $600 or more were good. But the
company continued to struggle with its bread-and-butter $400 and
And a 25 percent sales increase in China helped limit some
of the decline in North America. Coach also did well with men's
items, where sales rose 20 percent.
Overall revenue fell 7.4 percent to $1.1 billion in the
third quarter ended March 29, less than the $1.13 billion
analysts expected, according to Thomson Reuters I/B/E/S.
Quarterly net income fell to $190.7 million, or 68 cents per
share, from $238.9 million, or 84 cents per share, a year
(Reporting by Phil Wahba in New York; Editing by Sofina
Mirza-Reid, Bernadette Baum and Tom Brown)