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Coach sandbagged by handbags

Tuesday, October 22, 2013 - 01:24

Oct. 22 - Coach's profit fell as sales of handbags and fashion items dropped in North America. Fred Katayama reports.

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Rivals are poaching in Coach's turf. Sales of its iconic handbags and fashion accessories fell sharply in North America in the latest quarter as it faces intense competition from Michael Kors, Kate Spade and Tory Burch. That's key because Coach gets 70 percent of its sales in its home region, and those sales are decelerating. Inventories were high, and profit margin shrank. Sales from China were strong, but the weak performance in two big markets, North America and Japan, and the stronger dollar ate into earnings, Coach's profit fell 1.6 percent. Coach has been trying to recast itself as a "lifestyle brand," adding clothes and shoes to diversify from its lineup of handbags. But Michael Kors has been stealing market share as it expands its popular "shops within shops" at department stores. And Coach is going through a management transition with CEO Lew Frankfort set to be replaced next year with the executive who guided its expansion into Asia, Victor Luis. Based on the latest results, Cowen analyst Faye Landes said, "The company's turnaround is not imminent and is likely to be an iterative effort." Its stock certainly hasn't turned around. Once one of Wall Street's favorites, Coach fell at the open and is down more than 2 percent this year. Its archrival, Kors, is up more than 50 percent.

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Coach sandbagged by handbags

Tuesday, October 22, 2013 - 01:24