A new line of bags found its way into Coach (COH) stores last month (thanks to its new creative director). But it wasn’t soon enough…
Coach’s first-quarter sales took a hit. In fact, its profit fell by nearly half as North American comparable sales fell for the sixth consecutive quarter.
As devastating as this may sound, the profit actually beat analysts’ forecasts…
Meanwhile, international sales were strong, boasting double-digit sales growth in Europe. China’s sales grew by 10% (half the pace of the prior quarter). In spite of that small silver lining, though, overseas sales were no match for the weakness in North America (which makes up two-thirds of revenue).
Trying to recoup, Coach plans to close some of its stores and place a little more focus on revamping its merchandise.
While Coach used to completely dominate the (affordable) luxury market for handbags, that’s just not the case anymore.
Daniela Nedialkova, Atlantic Equities analyst, said, “We expect the first quarter to be the low point for comp and gross margin for the year, though pressure will persist.”
The handbag maker’s shares (which fell by nearly 36% this year), dropped even further in early trading.
With rivals like Michael Kors (KORS), Kate Spade (KATE), Tory Burch, and Marc Jacobs, Coach has simply lost market share. In fact, over the past two years, its handbag share fell all the way down to a measly 18%.
One factor that differentiates Coach from its other main competitors is that it boasts a dividend yield of 3.93%, while all others mentioned above don’t pay out dividends.
But given Coach’s recent mishaps, it’s hard to say whether this dividend will last, or if it’ll dwindle away along with the company’s profits.
Income Research Team