This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

[video] Why Coach Shares Are Dropping Sharply (Update 1)

This story has been updated from 8:15 am EST with analyst quote and updated stock price.

NEW YORK (TheStreet) - Coach (COH - Get Report) shares were plummeting roughly 7% after the handbag and accessories maker missed analysts' expectations on both its top and bottom lines for the December-ended quarter.

Coach reported net income of $297.4 million for its second fiscal quarter, down 15.6% from the year-earlier period. Earnings per share of $1.06 missed analysts' estimates of $1.11 a share, according to Thomson Reuters.

Total net sales, which include domestic and international business, fell 5.6% to $1.42 billion. Analysts expected sales of $1.483 billion. On a constant currency basis, sales declined 3% for the quarter, Coach said.

Must Read: Why TJX Is Falling and Lululemon and Gap Are Rising

Shares were down 7.2% to $48.78 at last check.

Coach CEO Victor Luis blamed disappointing holiday sales in the U.S. for the miss.

Comparable-store sales for its U.S. stores were down 13.6% for the quarter. Coach's total North American sales declined 9% to $983 million, with direct sales down 8% for the quarter.

"During the holiday quarter, total sales fell slightly in constant currency as weakness in our North American women's bag and accessories business offset strong growth in Men's, footwear, and robust results in emerging Asian markets and Europe. 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," Luis said in a statement.

It doesn't help that Michael Kors (KORS), Coach's biggest competitor, continues to win share in the U.S. Michael Kors is expected to report earnings on Feb. 4. Analysts, according to Yahoo! Finance, expect the company to report earnings of 86 cents a share for the December-ended quarter, up 34% from last year.

Coach's international sales fared somewhat better, buoyed by sales in China. Total international sales rose 2% to $425 million over last year. On a constant currency basis, international sales rose about 11%, the company said.

Sales in China jumped 25% and the business is on track to meet annual guidance of $530 million, it said. However, sales in Japan declined 2% on a constant-currency basis, while dollar sales were 21% below the prior year, reflecting the weaker yen.

"We have taken the initial steps in Coach's transformation across all aspects of the consumer experience - product, stores and marketing," Luis added. "Notable was the success of the Borough bag - a prelude to a comprehensive re-platforming of our women's product assortment across bags, accessories and lifestyle categories coming this fall. We also introduced a new, dual gender lifestyle store concept in two key locations, which will serve to inform our continuing evolution of global store environments. And, in marketing, we expanded our initiatives, leveraging key style influencers in our ongoing campaign."

Wells Fargo Securities analyst Paul Lejuez, who rates Coach "market perform," noted that it looks as if the luxury retailer is going to struggle for a long time, giving the market little hope. "During this period of management transition and targeted brand transformation, remarkably weak results during the all-important holiday season highlight how difficult it will be for COH to reinvent itself and gives the market little hope that it can occur in the foreseeable future, in our view," Lejuez wrote in a note.

-- Written by Laurie Kulikowski in New York.


Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
COH $39.69 0.18%
AAPL $92.03 -1.30%
FB $119.08 1.10%
GOOG $708.31 0.98%
TSLA $215.35 1.80%


Chart of I:DJI
DOW 17,672.15 +11.44 0.06%
S&P 500 2,049.57 -1.06 -0.05%
NASDAQ 4,708.9850 -8.1090 -0.17%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs