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Shares of Coach Inc. fell 2.46 percent on Tuesday as investors took issue with the company’s decision to hold off on guidance for fiscal year 2009, even though third-quarter results beat Wall Street’s expectations by 1 cent.
Lew Frankfort, chairman and chief executive officer, said on a conference call with Wall Street analysts that “providing guidance at this time [would] require a level of false precision.”
He explained the company is looking forward to a good year, with double-digit gains on the top and bottom line. He told WWD that he’d “rather wait three months more to get a better sense of where we are in July when we begin the year.”
For the three months ended March 29, the company said income rose 8.3 percent to $162.4 million, or 46 cents a diluted share, from $150 million, or 40 cents, in the same year-ago quarter. Sales rose 19.1 percent to $744.5 million from $625.3 million, while comps gained 9 percent.
For the nine months, income rose 13.2 percent to $569.5 million on a 22.4 percent gain in sales to $2.40 billion.
Frankfort, who was among the first to call the current slowdown a consumer-led recession, said, “The consumer in March is more pessimistic than she was in January. Most consumers believe the economy is getting worse.”
He said the sales environment will continue to be a tough one, and acknowledged that he “has no idea when it will let up. I expect it to last at least through the calendar year. We don’t expect it to improve during holiday.”
Still, Coach is one of the few retailers that is still executing according to its existing plans. The accessories firm will still open 40 retail stores in the coming year. It also will test a new store format called “the gallery” in three upscale malls, beginning with Short Hills, N.J. The gallery format creates more room to showcase the entire Coach collection, from handbags to fragrance, scarves, men’s and jewelry.
According to Frankfort, “We are keeping to our plan on opening stores. The stores are extremely profitable. There is no change in the number we will open internationally either. Our business is doing very well.”
At the end of the quarter, Coach operated 287 full-price stores and 101 factory stores in North America, and 147 locations in Japan. The company still believes the North American market can easily support 500 retail stores, including up to 20 in Canada.
The company is projecting fourth-quarter earnings per share of 50 cents on sales of $780 million, both up 20 percent from year-ago levels. For the full year, Coach expects sales of $3.18 billion, with diluted EPS rising 22 percent to $2.06.