Coach Inc. shares plunge on challenging holiday quarter

The muted holiday results offer more evidence that the shopping season was tough as shoppers grappled with the economic uncertainty brought on by the European recession and the U.S. fiscal cliff negotiations.

Coach is considered a bellwether for upper-middle-income shoppers who trade up to luxury goods, so the latest snapshot raises concern about their spending, as well as that of the wealthy.

The quarter is also evidence of growing competition from rivals like Michael Kors Holdings Inc., whose trendy bags are attracting loyal followers. Last year, Coach launched its Legacy collection of handbags inspired by classic styles in the company's archives. The company told investors during a conference call Wednesday that it's making its stores more inviting by such strategies as opening shoe salons in its freestanding locations to showcase its footwear.

The New York-based company says its net income was US$352.7 million, or US$1.23 per share, in the quarter ended Dec. 29. That compares with US$347.5 million, or US$1.18 per share, a year ago.

Net sales rose 4 percent to US$1.50 billion.

The results were short of expectations for earnings of US$1.28 per share on revenue of US$1.6 billion.

Shares of Coach fell 16.4 percent, or US$9.93, to close at US$50.75 Wednesday. That's near their 52-week low of US$48.24.

“During the holiday quarter, we drove modest growth and continued to gain overall traction on our key strategies,” Chairman and CEO Lew Frankfort said in a statement. He noted that while the company posted strong international results, helped by a strong men's business, the company was disappointed by its performance in North America, where the holiday season proved “challenging.”

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