Updated from 10:01 a.m. EDTShares of Coach ( COH) tumbled 12% Tuesday after the luxury handbag maker offered cautious comments about the holiday season. The New York-based company reiterated its profit forecast for the fiscal year but said traffic at its U.S. retail stores has slowed in recent weeks, leading it to give a "conservative" same-store sales forecast for rest of the year. Shares were down $5.09 to $36.38 in recent trading. The outlook came in Coach's first-quarter earnings report, in which the company posted a profit of $154.8 million, or 41 cents a share, for the period ended Sept. 29. A year earlier, Coach made $125.6 million, or 34 cents a share. The earnings per share were above Coach's July forecast of 39 cents, and were a penny ahead of analysts' average estimate. Coach's first-quarter sales rose to $676.7 million from $529.4 million a year earlier. Wall Street anticipated sales of $659 million, according to Thomson Financial. Same-store sales, or sales at stores open at least a year, jumped 19.3% in the U.S. In Japan, where Coach has a significant presence, same-store sales rose at a low-single-digit rate. U.S. retail stores recorded a 10.8% rise in same-store sales, while outlet stores saw a 27.3% surge. For the key holiday period, however, Coach forecast a same-store sales rise in the low-single-digits for its North American retail sales, though it expects its outlet stores will generate growth at least in the mid-teens.
"While we're well positioned for the holiday season, we are, however, concerned with recent traffic trends in our North American retail stores, reflecting the retail environment and the unusually difficult comparisons with last year," said Chairman and CEO Lew Frankfort. "Thus, we believe it's prudent to be more conservative in our comparable-store sales guidance for the balance of the fiscal year." Coach sees holiday-quarter earnings of 68 cents a share and sales of $970 million -- below analysts' targets for EPS of 70 cents and sales of $984 million. For the full fiscal year, Coach reiterated its forecast of earnings of $2.06 a share and sales of $3.17 billion. Wall Street anticipated earnings of $2.08 a share and sales of $3.19 billion. Coach has been a fast-growing company that has benefited from a strong consumer appetite for upscale goods. While its bags and accessories appeal to high-end shoppers, Coach also has price points that make it attainable for less wealthy consumers seeking a luxury product. But like most retailers, Coach has been plagued by worries that economic headwinds will slow down consumer spending and cut demand from middle-income shoppers. Even before Tuesday's stock drop, the company's shares had fallen 23% since hitting a 52-week high of $54 in April. Coach's tepid outlook for the holiday season brought down shares of another luxury company -- Tiffany ( TIF). The jeweler, like Coach, appeals to a luxury market while but also brings in middle-income buyers seeking "aspirational" products. Shares of Tiffany recently were down $3.44, or 6.2%, to $52.35.