The accessories brand is in the midst of what it hopes is a transformation to build on what has been decades of mammoth growth, but it is hitting a few bumps in the process.
Shares of Coach fell 7.5 percent to $50.10 at the end of trading Tuesday, following a less-than-stellar first-quarter earnings report, in which the retailer posted a 1.6 percent dip in income and a 0.9 percent decline in sales.
As the economy slowly battles back, spendthrift consumers have sought out more fashion-forward products at an affordable price. For the 72-year-old brand, that has translated to a loss in market share to buzzier rivals such as Michael Kors Holdings Ltd.
“One can say we were slow to respond to the evolving competitive experience here in North America,” said president and chief commercial officer Victor Luis, who will become chief executive officer in January. “But that is no longer the case.”
The incoming ceo told WWD that the coming months, through 2014, will prove momentous for Coach as it is in the process of rolling out new store designs, quarterly capsule ready-to-wear and accessories collections and fresh marketing and advertising campaigns. This will all come to a head next fall, when the first collection of newly appointed executive creative director Stuart Vevers hits stores.
“You will see proof points of our strategy,” said Luis, who declined to forecast when Coach’s financial results would begin to ramp up again. “We’re not going to call a change in trend until we see it in our North American stores, so we aren’t providing any guidance. What we are seeing is reduced traffic, across our full-price fleet especially.”
For the period ended Sept. 28, net income totaled $217.9 million, or 77 cents a diluted share, compared with year-ago income of $221.4 million, or 77 cents a share.
Quarterly sales slid 0.9 percent to $1.15 billion compared with sales of $1.16 billion in the year-ago quarter. Analysts expected earnings per share of 76 cents on sales of $1.19 billion.
In North America, quarterly comparable-store sales fell 6.8 percent, while total revenue declined 1 percent to $778 million. International revenue declined 0.5 percent to $365 million from $367 million, due in part to a 2 percent dip in sales in Japan, which was exacerbated by a weak yen. Sales in China rose 35 percent, as comps increased at a “double-digit” rate.
Frankfort, who led the earnings call for the last time as chairman and ceo — a post he has held for 18 years — called out Coach’s growth in secondary businesses and regions.
“We continued to drive excellent growth in emerging markets and Europe as well as in the men’s business and developing lifestyle categories, such as footwear,” said Frankfort, who will become executive chairman in January.
Coach said it expects the men’s business, which is roughly $600 million, to expand to about $700 million in fiscal 2014. In three years, it expects the business to hit the $1 billion threshold. Footwear is also a growing category, according to Francine Della Badia, president of North American retail.
“Footwear, which relaunched this spring in about 170 full-priced locations, doubled in penetration from about 4 percent to over 8 percent at higher AURs [average unit retail] reflective of the compelling assortments,” she said. “This category performance highlights our consumers’ desire for more emotional trend-right fashion product. We are seeing strong performance across heels, flats and booties. We’re focused on building our market share within the fragmented, nearly $25 billion global premium footwear category.”
Within the handbag segment, Coach touted its Borough bag, a new classic square tote that comes in three sizes, in either pebbled or polished calfskin leather, and in different colors. The bag is at the center of the brand’s latest campaign, featuring models Karlie Kloss and Liu Wen, both of whom appear in print and digital ads wearing head-to-toe Coach looks.
Expressing that there’s much work ahead for the brand, Luis called Coach’s battle a “multiyear” journey.
As a result, the company expects to deliver flat-to-low-single-digit sales growth in constant currency. In North America, Coach predicts its comp run rate to be down high-single digits for the balance of fiscal 2014.
@kering_official is spinning off its stake in puma in an effort to focus on its luxury brands, the brand operator announced yesterday. “We are proud to have supported the turnaround of Puma, which now has unrivaled capabilities to take full advantage of the specific dynamics of its global markets and is poised to achieve substantial growth,” said François-Henri Pinault, Kering’s chief executive officer and chairman. Artémis will become a “long-term strategic shareholder” of Puma with a 29 percent stake. #wwdnews #wwdfashion (📷: @jilliansollazzo)
The fashion world mourns for celebrated street style photographer, Nabile Quenum, who died at age 32 in Paris.
Quenum, creator of the fashion blog “J’ai Perdu Ma Veste,” was a fashion week fixture, and regularly shot for New York magazine’s The Cut, among other outlets, and brands such as Louis Vuitton, Moncler and Adidas. He was also actively involved in the #NoFreePhotos initiative, which kicked off in the fall. Read more about Quenum in @kbsmoke's story on WWD.com. #wwdnews
@verwanggang and @maisonladuree have teamed up on a dessert collab called Vera Wang Pour Ladurée. The collection, which launched this week, features a specialty macaroon, as well as a wedding cake inspired by one of the designer’s gowns. “I could not imagine a more delicate or sophisticated creation to grace any couple’s celebration,” said Wang. #wwdfashion
“I’m Russian and I love to use all these little tricks that I got from my grandma or my mom. We didn’t have a lot of money for creams or anything like that so we would use a garden as a beauty treatment regime. We’d put cucumber in the fridge and do a cucumber mask,” says model @irinashayk on one of her beauty hacks. WWD asked celebs what their go-to self-care rituals are. See what Naomie Harris, Freida Pinto and more said on WWD.com. #wwdeye #wwdbeauty (📷: @zefashioninsider)
Exclusive: @viktorandrolf are teaming up with @Zalando on a collection made from leftover clothing. The lineup, which lands at the retailer February 1, includes 17 pieces adorned with sliced up and repurposed overstock from the retailer’s private label collection. Pictured here is a look from the collection –– see more on WWD.com. #wwdfashion #wwdnews
@duewestnyc is the newest bar joining the collection of intimate neighborhood-focused spaces in the West Village. The cocktail menu, which includes bitters and syrups made in-house, offers a “Build Your Own Old-Fashioned” – like the one pictured here – where guests can choose from a list of spirits and unexpected sugars and bitters. #wwdeye
Spotted at last night’s National Board of Review gala in NYC: Angelina Jolie. Jolie – along with Meryl Streep, @lupitanyongo and more – continued the all-black dress code from Sunday’s Golden Globes. #wwdeye (📷: @lexieblacklock)