Coach's profit down as same-store sales in North America fall for the sixth straight quarter. Fred Katayama reports.
Coach unveiled its new line of bags and clothing under its new creative director last month, but it didn't come early enough to spruce up its first quarter sales. The retailer's profit fell by nearly half as North American comparable sales fell for the sixth straight quarter. Nevertheless, that profit beat analysts' forecasts. International sales was its bright spot, with double-digit sales growth in Europe. China grew 10 percent, but that was half the pace of the prior quarter. Overseas sales couldn't overcome the weakness in North America, which makes up two-thirds of revenue. Coach is closing stores and revamping its merchandise. It used to dominate the affordable luxury market for handbags, but it has lost market share to rivals such as Michael Kors, Kate Spade, Tory Burch, and Marc Jacobs. Its handbag share fell by half from two years ago to 18 percent, according to Piper Jaffray. Atlantic Equities analyst Daniela Nedialkova said, "We expect the first quarter to be the low point for comp and gross margin for the year, though pressure will persist." Coach's shares, which have fallen nearly 36 percent this year, dropped further in early trading.