Upscale leather goods maker Coach reported another quarter of slowing growth in North America, its top market, hurt by the deals it offered to lure price-conscious shoppers back from competitors and into its outlet stores. “The appetite, of course, among consumers to buy product at a discount is insatiable and growing,” CEO Lew Frankfort said.
Frankfort told analysts in April that Coach had the pricing power to wean outlet shoppers off of coupons because it alone sells these products, but a slow U.S. economy has caused consumers to look more carefully at what they buy. As competitors ramped up their promotions in May, Coach brought back coupons at its factory outlet stores.
The retailer said overall revenue in its fiscal fourth quarter ended June 30 rose 12% to $1.16 billion, below the $1.2 billion Wall Street analysts were expecting. Coach, popular for its high-quality but relatively affordable handbags and wallets, sounded a sour note for the current fiscal year: It expects North American same-store sales to be up by a low to middle single-digit percentage, compared to a 6.6% jump last year.
It reported Q4 EPS of $0.86, $0.01 above Canaccord Genuity Consumer Retail Analyst Laura Champine’s estimate and consensus. Same-store sales increased 1.7% y/y on top of +10% in North America, below the +7% she had forecast. The shortfall was driven entirely by weakness in the factory channel as a result of its earlier decision to eliminate couponing.
The company’s business in Asia remains healthy with CC sales up 16% in Japan and 60% in China. Management commented that the investments will result in deleverage in FY13. Champine lowered her FY13 EPS estimate by $0.19 to $3.91, $0.20 below prior consensus on higher expenses as Coach acquires its retail businesses in Asia.
Coach (COH : NYSE : US$49.33), Net Change: -11.25, % Change: -18.57%, Volume: 33,284,323