Coach sales miss forecasts as it tightens supply to shops

Coach Inc's quarterly revenue narrowly missed analysts' estimates as the handbag maker cut back on discounting and tightened supply to department stores in an attempt to regain its premium brand status. The company's shares, which have risen by more than a quarter this year, were down 2 per cent in volatile premarket trading on Tuesday.

Coach, a 75-year-old brand once associated with high-end luxury and top celebrities, has been facing intense competition from newer entrants such as Michael Kors Holdings and Kate Spade.

Design refresh

To revive demand, Coach has renovated its outlets and taken steps to refresh its designs, including hiring well-known fashion designer Stuart Vevers.

Coach has also slashed the number of department stores it sells to, which reduced net sales at these stores by high single-digit percentages in the fourth quarter, the company said.

Sales rose 2 per cent at North American stores open at least a year, the first quarterly rise in over three years, mainly due to higher online sales. Analysts on average had expected a 1.8 per cent rise, according to Consensus Metrix.

Corrective action

“While the sales uplifts may seem somewhat anaemic, it is important to note that they are being delivered against the backdrop of a falling number of doors through which Coach sells,” said Neil Saunders, the chief executive of research firm Conlumino. “While disruptive, this corrective action is clearly delivering.”

Coach's unit Stuart Weitzman Holdings said on Tuesday that it hired well-known accessories designer Giovanni Morelli as creative director.

Coach’s net sales jumped 15 per cent to $1.15 billion (€1.02 billion) in the quarter ended on July 2nd, but missed the average analyst estimate of $1.17 billion, according to Thomson Reuters I/B/E/S. The company said it expected sales to rise in low to mid single-digit per cent in fiscal 2017. Net income rose nearly seven-fold to $81.5 million, or 29 cents per share. – (Reuters)