"While we're well positioned for the holiday season, we are however concerned with recent traffic trends in our North American retail stores," said Lew Frankfort, chairman and CEO, during a conference call. The traffic "pressure," he told analysts, occurred primarily in the Northeast; parts of the South, particularly Florida, and parts of California."
Improvements in conversions "offset weak traffic trends," he said, adding, "we believe it's prudent to be more conservative." He also reiterated the company's "overall continuing positive outlook, including the delivery of a 20% revenue gain in this holiday quarter.
"Our new retail store volumes continue to surpass our initial projections both in existing markets, such as Glendale, AZ, and in new markets, such as Rochester, MN," said Frankfort. He projected low single-digit comp-store sales for the North American retail stores and comps of "at least the mid-teens" for its factory outlet stores.
Fiscal first quarter total sales reached $677 million, compared with $529 million for the prior-year quarter. Net income reached $155 million, versus $115 million.
US comp-store sales increased 19.3%, with retail store sales up 10.8% and outlet store sales up 27.3%. Indirect sales, primarily from US department stores, jumped 35%. Direct-to-consumer sales rose 26%. In Japan, sales rose 17% on a constant-currency basis, while dollar sales there rose 15% when adjusted for a weaker yen.
Coach opened 13 retail stores and three factory stores in North America during the quarter and expanded nine stores and four outlet units. As of Sept. 29, it operated 272 retail stores and 96 factory outlet units in North America. It also opened four new units and expanded one in Japan, taking its total in that country to 146.
Frankfort expressed confidence in the luxury consumer. "She spends when she shops," he said. For holiday, stores will feature handbags priced over $400, "our fastest-growing price segment." Stores will also carry jewelry, fragrance and a wide variety of gifts priced under $100, he added.
Despite the positive first-quarter performance and Frankfort's expression of tempered confidence for holiday, shares of COH fell nearly 12.8% on the NYSE by mid-day, following the conference call to sink to a new 52-week low of $36.30 a share. The previous low of $37.57 a share occurred one day shy of a year ago on Oct. 24, 2006, and the 52-week high was $54 a share on this April 23.
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