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Published
Jan 22, 2014
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Coach loses more ground to rivals in North America

By
Reuters
Published
Jan 22, 2014

Coach said sales in North America fell further in the final quarter of 2013, as it loses share in the handbag business to fast-growing rivals such as Michael Kors and kate spade.

Coach current campaign | Source: Coach

Coach shares fell as much as 8 percent in premarket trading after it reported a 13.6 percent fall in comparable-store sales in North America, which accounts for 70 percent of its revenue.

Coach remains the number one seller of luxury handbags in the United States but has been losing market share for the past two years.

It was the third quarter in a row that the company has reported a fall in sales at North American stores open for more than a year, including online sales.

"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," Chief Executive Victor Luis said in a statement on Wednesday.

Between 2011 and 2012, Coach's share of the U.S. handbag market fell to 17.5 percent from 19 percent, according to Euromonitor International. Michael Kors' market share rose to 7 percent from 4.5 percent.

North American sales fell 9 percent to $983 million in the second quarter ended December 28.

China remained a bright spot, however, with comparable store sales rising at a "double digit rate" in the quarter and overall sales growing 25 percent.

Investors have been concerned that a crackdown on bribery in China could affect luxury sales in Coach's fastest-growing market.

Coach's overall revenue fell 5.6 percent to $1.42 billion, in the quarter, while net income dropped to $297.4 million, or $1.06 per share, from $352.8 million, or $1.23 per share, a year earlier.

Analysts on average had expected earnings of $1.11 per share on revenue of $1.48 billion, according to Thomson Reuters.

Coach warned in October that it expected same-store sales in North America to fall by "high single digits" in percentage terms through the end of its fiscal year ending June.

"Near-term pressure remains - though we don't think that's entirely unexpected given the (weak) holiday season overall," Stifel Research analyst David Schick said in a note.

Along with intensifying competition, Coach has had to deal with a series changes in its top management over the last year, including a new chief executive and creative director.

Coach shares were down 6.7 percent at $49 in premarket trading.

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