Coach's forecast, quarterly sales miss estimates, shares slip

Industries Reuters

Handbags are pictured through a window of a Coach store in Pasadena, California, January 26, 2015. REUTERS/Mario Anzuoni

Handbag maker Coach Inc (COH) issued a full-year sales forecast that missed analysts' estimates and reported lower-than-expected quarterly sales, as it pulls back products from department store shelves to maintain its premium brand cachet.

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The company's shares were down 6.3 percent at $44.92 in premarket trading on Tuesday. The stock has gained nearly 37 percent this year.

In a bid to regain their brand appeal and maintain exclusivity, luxury retailers like Michael Kors Holdings Ltd and Coach have been cutting discounts and pulling products off department store shelves in order to sell them at full price through their own stores.

A continuing decline in sales across the sector owing to competition from online retailers and niche handbag makers such as Tory Burch have also forced the companies to resort to cost-cutting measures like reducing inventory levels to improve their margins.

In order to boost sales and profits, Coach bought smaller rival Kate Spade & Co last month in a bid to tap into its high spending millennial customer base. Kors has offered to acquire high-end shoe maker Jimmy Choo.

Coach said it expects revenues for fiscal 2018 to reach $5.8 billion to $5.9 billion, with Kate Spade contributing over $1.2 billion. The company expects earnings of $2.35-$2.40 per share.

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Analysts on average were expecting a profit of $2.49 per share on revenue of $6.04 billion, according to Thomson Reuters I/B/E/S.

Coach said its net income nearly doubled to $151.7 million, or 53 cents per share, in the fourth quarter ended July 1.

Net sales fell 1.8 percent to $1.13 billion, missing the average analyst estimate of $1.15 billion. (Reporting by Siddharth Cavale and Uday Sampath Kumar in Bengaluru; Editing by Maju Samuel)

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