UPDATE: Coach To Cut Store Openings As Profit Drops 14%
January 21 2009 - 9:05AM
Dow Jones News
By Andria Cheng
NEW YORK (Dow Jones) -- Hurt by the economic downturn that has
affected retailers across the board, upscale leather-goods seller
Coach Inc. said Wednesday that its second-quarter profit fell 14%
and pared back its U.S. store-opening plans.
Net income in the quarter ended Dec. 27 declined to $216.9
million, or 67 cents a share, from $252.3 million, or 69 cents a
share, in the year-earlier period. Sales fell 1.8% to $960.3
million.
On average, analysts polled by FactSet Research were looking for
earnings of 68 cents a share. Earlier this month, analysts lowered
their estimate from an average of 75 cents a share after Coach
(COH) said it would miss its previous profit forecast after a
disappointing holiday season.
The New York-based company said it's not providing a forecast
for the rest of the fiscal year.
The retailer also announced it is cutting back its planned
number of new stores from the current run rate of 40 North American
retail locations a year to about 20, while also suspending existing
retail store expansions. Outside the U.S., Coach said it will
continue to implement its distribution growth plans to expand in
emerging markets, especially China, where it said growth remains
strong.
Coach said it's also increasing its selection of products across
a variety of prices to entice shoppers who are "clearly more
reluctant to spend."
"The significantly depressed backdrop and barrage of poor
economic news clearly impacted consumer spending," said Chief
Executive Lew Frankfort in a statement.
Gross margin narrowed to 72.1% from 75.4% a year ago, hurt by
more promotions at its discount factory-store outlets and the
company's moves to offer products at different price levels.
Direct-to-consumer sales increased 2% to $818 million. North
American comparable-store sales declined 13%. In Japan, sales rose
15% but would have dropped 1% excluding the impact of a stronger
yen. China sales remained robust, the company said.
Indirect sales fell 19% to $143 million, hurt by reduced
shipments to U.S. department stores.
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