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Coach Posts Holiday Sales Miss; Shares Plummet

Source: coach.com

Upscale leather-goods maker and retailer Coach on Wednesday reported holiday quarter revenue below Wall Street forecasts as a tough economy and stiff competition in the women's handbags segment hurt sales in North America.

Its shares tumbled 11.5 percent to $53.70 in pre-market trading.

Overall, revenue in Coach's fiscal second quarter, which ended Dec. 29, rose 3.8 percent to $1.5 billion, missing analyst projections for net sales of $1.6 billion, according to Thomson Reuters I/B/E/S.

Sales at stores open at least a year in North America, still its biggest market by far, fell 2 percent during the quarter. The company also struggled in Japan, its No. 2 market, where sales fell two percent, excluding the impact of a weaker yen.

"We were disappointed by our performance in North America, where the holiday season proved challenging," Chief Executive Lew Frankfort said in a statement.

The holiday shopping season was weak for U.S. retailers, with sales rising 3.1 percent in November and December, according to the National Retail Federation, well below original forecasts.

Many retailers had to resort to cutting prices to get shoppers to spend and that promotional environment is something that dogged Coach earlier in the year as well.

Coach is also facing fast-growing rivals like Michael Kors and Fifth & Pacific's Kate Spade, whose same-storesales rose 27 percent last quarter.

There were nonetheless some bright spots for Coach. In China, still a small market for the New York-based company but the cornerstone of its international expansion, total sales were up 40 percent. Coach's push tobuild up its men's business is paying off, with the company set to have annual sales in that segment rise 50 percent for the fiscal year.

Net income in the quarter was $352.8 million, or $1.23 per share, compared with $347.5 million, or $1.18, a year earlier, and 5 cents below Wall Street estimates.

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