Oct 27, 2015
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Handbag maker Coach posts slowest sales decline in nine quarters

Oct 27, 2015

Coach Inc reported a better-than-expected quarterly profit, helped by demand for new products such as its Ace and Nomad handbags, a sign that the company's turnaround program is gaining traction.

Coach's shares were up nearly 4 percent in premarket trading on Tuesday.


The company has been renovating its stores and refreshing styles under creative director Stuart Vevers in an attempt to win back customers and market share from newer rivals such as Michael Kors Holdings Ltd (KORS.N) and Kate Spade & Co (KATE.N).

Coach, founded in a Manhattan loft in 1941, has also been focusing on pricier handbags and cutting back on discounts and promotions to improve margins and preserve its luxury brand status.

These actions appeared to have helped as the company's sales fell just 0.8 percent in the first quarter, compared with declines of between 11 and 16 percent in the previous three quarters.

Coach, which gets about 35 percent of its revenue from international markets, maintained its "high single digit" growth sales forecast for 2016.

The company saw strong demand for its pricey handbags such as the nearly $600 Ace satchel, inspired by "motorcycle gang nicknames", and the $500 crescent shaped Nomad hobo bag made of glove-tanned leather.

Coach also saw strong demand for Stuart Weitzman luxury shoes, a business it acquired in May. Sales in the business were $87.5 million, more than double than in the preceding quarter.

North America same-store sales fell 9.5 percent, the smallest decline in two years and less than analysts average estimate of a 9.9 percent drop, according to research firm Consensus Metrix.

Sales in China rose 3 percent on a constant currency basis and 6 percent in Japan in the quarter ended Sept. 26.

The company's net income fell to $96.4 million, or 35 cents per share, from $119.1 million, or 43 cents per share.

Excluding items, Coach earned 41 cents per share.

Analysts on average had expected earnings of 40 cents per share and revenue of $1.04 billion, according to Thomson Reuters I/B/E/S.

Up to Monday's close of $30.32, Coach's shares had fallen 19.3 percent this year.


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