Coach Inc., the luxury leather-goods retailer, said profit in the fiscal first-quarter fell 5.8% as weakness in North American sales and greater discounting at its outlet stores offset sales gains.Net income dropped to $145.8 million, or 44 cents a share, in the period ended Sept. 27 from $154.8 million, or 41 cents. Per-share net rose on a decline in the number of shares outstanding. Sales rose 11% to $752.5 million from $676.7 million on strong gains in Asia and new store openings, the New York-based company said.
Coach has said it has been more promotional at its discount outlets as budget-conscious U.S. shoppers seek name-brand items at lower prices. It also reduced shipments to U.S. department stores, citing weaker demand.
The retailer forecast a second-quarter profit of 77 cents a share on sales of $1.05 billion, up from 69 cents a share and $978 million, a year ago. Coach lowered its estimate for full year sales to a gain of 10% but maintained a per-share profit forecast of $2.25.
Coach said in preparation for the holidays it is controlling expenses and introducing new styles and designs in a variety of colors and fabrics, and in a range of prices, to tempt shoppers. It is introducing a $98 wallet with more credit-card slots and a $298 Madison satchel that features abstract geometric Coach logos.
"The big issue that's confronting retail today is lack of consumer confidence," said Coach Chief Executive Officer Lew Frankfort in an interview. "Until the economic situation is stabilized and people have confidence that we won't get into a deeper recession, it's expected consumers are going to be cautious."
While Coach tamped down its full-year sales forecast in light of the shaky environment for retailers, it kept its full-year profit forecast intact and offered a fiscal second-quarter outlook that was better than some analysts expected.
Coach shares were up 9%, or $1.74, to $20.37 in 4 p.m. composite trading on the New York Stock Exchange.
The company, which had 318 full-priced stores and 103 factory outlets in North America, will stick to its store-opening goal of adding about 40 locations in the region each year. An operating margin of over 30% allows new stores to be profitable from day one, Mr. Frankfort said.
