Shares of Coach Inc. slid 16.4 percent Wednesday to $50.75, after the handbag maker said sagging holiday demand and increased competition in the accessories market contributed to lower-than-expected second-quarter earnings. The New York-based brand also registered negative comparable-store sales in North America for the quarter, marking only the third time in 11 years that it recorded a negative comp. Chairman and chief executive officer Lew Frankfort told analysts on the conference call that the company experienced “weakness” in its women’s business here and globally, due in part to “heightened promotional activity,” which “built throughout the quarter” and “became aggressive” in department stores.
Coach introduced Legacy, a dual-gender, upscale footwear, accessories and apparel collection last year, which is a sort of precursor to a fuller expression of the brand’s evolution.
“We’ve been strengthening our teams to enhance and build out the Coach experience through product, retail environments and integrated marketing,” the ceo noted. “This holistic approach will continue to add excitement and cachet to the Coach brand. We’ve demonstrated the ability to offer a lifestyle assortment, including categories such as outer wear, shoes, jewelry, watches, eye wear and fragrance.”
The evolution, which will be in full bloom by holiday 2013, puts the company in even more direct competition with other lifestyle brands such as Michael Kors and Tory Burch, both of which have chipped away at Coach’s still-dominant share of the North American handbag market.
Coach said the lifestyle push won’t impact future earnings, as it has “built in sufficient capital to address store renovations and new store concepts, and improved and different fixturing.”
I'm glad Coach has stopped the snobish behavior.
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