Handbag Maker Coach's Quarterly Sales Drop 10%

Features Reuters

Coach Inc (COH), known for its Poppy handbags, reported a better-than-expected quarterly profit, helped by strong demand for its products in China, sending its shares up about 5 percent in premarket trading.

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Coach, founded in 1941 in a loft in Manhattan, has been ramping up efforts to boost sales in Asia and Europe as it loses ground in its biggest market, North America.

The company has been struggling to match the phenomenal growth of rivals Michael Kors Holdings Ltd. and Kate Spade & Co in the past few quarters in North America due to the rising popularity of their trendy handbags.

Coach's North America sales dropped 19 percent, while China sales increased 10 percent in the first quarter ended Sept. 27. China accounted for about 11 percent of total revenue in the year ended June 28.

Coach had said it expects China sales to rise 10 percent, topping $600 million in the year ending June 2015, as it opens more stores in tier 3 and tier 4 cities.

The company's net income fell 45.3 percent to $119.1 million, or 43 cents per share, in the first quarter.

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Excluding items, it earned 53 cents per share.

Net sales fell 10 percent to $1.04 billion.

Analysts on an average had expected earnings of 45 cents per share on revenue of $1 billion, according to Thomson Reuters I/B/E/S.

North America same-store sales decreased for the sixth straight quarter, falling 24 percent. This was better than the 25.5 percent drop analysts on average had estimated, according to research firm Consensus Metrix.

Coach stock was up at $38 premarket on Tuesday. Up to Monday's close, the stock has lost 35.5 percent of its value this year. 

(Reporting by Sruthi Ramakrishnan and Devika Krishna Kumar in Bangalore; Editing by Kirti Pandey and Savio D'Souza)