Consumer

Sarah Halzack is a Bloomberg Gadfly columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

When Ralph Lauren Corp. and Michael Kors Holdings Ltd. announced quarterly earnings last week, investors rewarded the progress of their turnaround efforts, sending their stocks soaring more than 13 percent and 21 percent, respectively, on the day they reported. 

Coach Inc., a rival accessible-luxury goods label, didn't get the same love on Tuesday.

Disappointed
Coach shares slumped in early trading Tuesday after the company reported earnings
Source: Bloomberg

The company reported that it rang up $1.13 billion in revenue in the latest quarter, slightly lower than the $1.15 billion it pulled down in the same period a year earlier. The decline comes as Coach pulls back its handbags from certain department stores and promotional events in an effort to make its goods feel more exclusive.

Investors know that's the strategy, but they still sent the stock down more than 7 percent in pre-market trading. So what gives? It appears they are concerned about the year-ahead outlook that executives offered, which includes a forecast for 30 percent revenue growth.  Investors seemed to be hoping for more given that in July, Coach completed its acquisition of handbag giant Kate Spade. 

On the Mend
Comparable sales in Coach's North America division have been improving over the last year
Source: Company Filings

But give Coach credit: It's still on the right track. The Coach brand saw positive comparable sales in the important North America division in each quarter of this fiscal year. It is succeeding in restoring that brand's cachet much in the same way that Ralph Lauren and Michael Kors are. It has similar plans for Kate Spade. And its efforts to build itself into a luxury powerhouse with a more diverse stable of brands is still a sound one, even if sales for the Kate Spade brand aren't quite what investors had hoped for out of the gate. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Sarah Halzack in Washington at shalzack@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net