July 31 (Bloomberg) -- Coach Inc., the largest U.S. luxury handbag maker, tumbled the most in almost 11 years after reporting fiscal fourth-quarter revenue that trailed analysts’ estimates amid slowing sales growth in North America.
Coach fell 19 percent to $49.33 at the close in New York, for the biggest drop since Sept. 17, 2001. The shares have declined 19 percent this year.
Sales at North American stores open at least a year advanced 1.7 percent, compared with a gain of 10 percent a year earlier. Jennifer Davis, an analyst at Lazard Capital Markets, projected an increase of 5 percent. Coach, facing competition from Michael Kors Holdings Ltd. and brands such as Tory Burch and Kate Spade, is working to attract consumers who have curbed spending on discretionary purchases amid slow economic growth.
“People are disappointed with the North American comparable sales,” Davis said in a telephone interview today. “The slowdown exacerbates concern that Coach might be losing market share in the U.S.”
Davis, based in New York, recommends buying the shares.
Coach’s revenue in the quarter ended June 30 advanced 12 percent to $1.16 billion, the New York-based company said today in a statement. Analysts projected $1.2 billion, the average of estimates compiled by Bloomberg.
Consumer spending in the U.S. stagnated last month as incomes increased. Household purchases, which account for about 70 percent of the economy, were unchanged in June after a 0.1 percent decrease the prior month, according to a Commerce Department report today.
Coach said “an increasingly promotional environment” prompted slower-than-expected growth at its factory outlets. The company reinstituted discount coupons late in the quarter.
The outlets were “entirely responsible” for the sales deceleration, Chief Executive Officer Lew Frankfort said on a conference call today.
Net income in the quarter rose 24 percent to $251.4 million, or 86 cents a share, from $202.5 million, or 68 cents, a year earlier, Coach said today. Analysts projected 85 cents a share, the average of 26 estimates compiled by Bloomberg.
(Coach executives held a conference call at 8:30 a.m. New York time to discuss results. To listen to a replay, go to EVTS <GO>)
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