Sales at Coach Inc in North America during the annual key holiday quarter plummeted by more than had been forecasted by the maker of handbags, as new competition continued to eat at its market lead while fewer shoppers entered its stores.
The company, based in New York, known for the Poppy handbag, announced on Wednesday that comparable store sales for North American had fallen by 13.6%, which was the third consecutive quarter sales have fallen in a market accounting for over 70% of its overall revenue.
Shares at Coach were lower by 7.7% to $48.50 to open. Coach has lost market share over recent year across the handbag market in the U.S. to rivals like Kate Spade, Tory Burch and Michael Kors Holdings.
Coach is attempting to offer more fashion and footwear to establish itself as a lifestyle brand. However, its product designs under Stuart Vevers the new creative director will be in their stores for a few more months, which leaves Coach with merchandise that is stale, said one Wall Street analyst.
Coach is presenting a new collection next month at Fashion Week in New York for the first time. Coach’s share from 2011 to 2012, of the handbag market in the U.S. dropped from 19% to 17.5%. Michael Kors on the other hand has seen its market share increase from 4.5% to 7%.
In October, Coach warned it expected sales in same-stores across North America to drop by up to 9% through the fiscal year end in June.
Coach said there were fewer shoppers in its stores. Gross profit dropped by 3% to just 69.2% of sales, which suggests it discounted prices at a higher rate than had been expected at is factory outlets. Some analysts have estimated that the factory outlet stores account for up to or more than 50% of the company sales.
The recently completed holiday season was more discount-driven than any season since the end of the recession, which lead a number of larger retailers in the U.S. to cut profit forecasts in early January.
