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Handbags maker Coach reduces new store growth plans
03 Feb '09
6 min read
Second fiscal quarter sales results in each of Coach's primary channels of distribution were as follows:
Direct-to-consumer sales increased 2% to $818 million from $803 million last year, which included a 1% decline in sales from new and existing Coach stores in North America. North American comparable store sales for the quarter declined 13.2%. In Japan, sales fell 1% on a constant-currency basis, while dollar sales rose 15% driven by a stronger yen. China sales remained robust, as POS sales continued to comp at a double-digit rate.
Indirect sales decreased 19% to $143 million in the second quarter from the $176 million reported for the prior year. This decline was primarily due to reduced shipments into U.S. department stores, as the company continues to tightly manage inventories in that channel given weak sales at POS. International POS sales rose during the period, notably in locations focused on the domestic consumer, driven by distribution.
During the second quarter of fiscal 2009, the company opened six retail stores and three factory stores in North America, bringing the total to 324 retail stores and 106 factory stores as of December 27, 2008. In addition, two retail stores and one factory store were expanded. In Japan, Coach opened one shop-in-shop and one factory store, taking the total to 160 at the end of the quarter.
Mr. Frankfort continued, “As intended, we significantly intensified our degree of innovation during the quarter leading with Madison – which was updated with new colors during the season - followed by Soho, Amanda and Leah. While many of our customers responded positively to these new offerings, the significantly depressed backdrop and barrage of poor economic news clearly impacted consumer spending. Additionally, we stood virtually alone among retailers in maintaining our long-standing practice of not discounting in our retail stores in order to protect our brand proposition.”
“During the Spring, we will continue to offer our customers an enhanced level of newness with collections such as Penelope, which launched the day after Christmas. Rounding out the third quarter introductions will be Heritage Stripe in February, and the new Parker collection in March. We're also expanding our sharper pricing initiative to increase our selection of product across a variety of price points, offering exceptional value to a consumer who is clearly more reluctant to spend.”
“While we believe our Spring product is quite powerful and will build a foundation for future seasons, our enthusiasm is tempered by what is inevitably going to be a prolonged period of weak consumer spending. Therefore, while we remain focused on innovation to support productivity, we are continuing to exercise disciplined expense control, reacting swiftly to changing business conditions, investing where prudent and cutting costs as appropriate."
"To this end, we have revisited our domestic store opening goals for FY10 with an eye toward reducing the number of new stores from our current run rate of 40 North American retail locations per annum to about 20, while also suspending retail store expansions. At the same time, we will continue to implement our distribution growth plans to capture the emerging market opportunity with a particular focus on China, where our growth remains strong.”
Direct-to-consumer sales increased 2% to $818 million from $803 million last year, which included a 1% decline in sales from new and existing Coach stores in North America. North American comparable store sales for the quarter declined 13.2%. In Japan, sales fell 1% on a constant-currency basis, while dollar sales rose 15% driven by a stronger yen. China sales remained robust, as POS sales continued to comp at a double-digit rate.
Indirect sales decreased 19% to $143 million in the second quarter from the $176 million reported for the prior year. This decline was primarily due to reduced shipments into U.S. department stores, as the company continues to tightly manage inventories in that channel given weak sales at POS. International POS sales rose during the period, notably in locations focused on the domestic consumer, driven by distribution.
During the second quarter of fiscal 2009, the company opened six retail stores and three factory stores in North America, bringing the total to 324 retail stores and 106 factory stores as of December 27, 2008. In addition, two retail stores and one factory store were expanded. In Japan, Coach opened one shop-in-shop and one factory store, taking the total to 160 at the end of the quarter.
Mr. Frankfort continued, “As intended, we significantly intensified our degree of innovation during the quarter leading with Madison – which was updated with new colors during the season - followed by Soho, Amanda and Leah. While many of our customers responded positively to these new offerings, the significantly depressed backdrop and barrage of poor economic news clearly impacted consumer spending. Additionally, we stood virtually alone among retailers in maintaining our long-standing practice of not discounting in our retail stores in order to protect our brand proposition.”
“During the Spring, we will continue to offer our customers an enhanced level of newness with collections such as Penelope, which launched the day after Christmas. Rounding out the third quarter introductions will be Heritage Stripe in February, and the new Parker collection in March. We're also expanding our sharper pricing initiative to increase our selection of product across a variety of price points, offering exceptional value to a consumer who is clearly more reluctant to spend.”
“While we believe our Spring product is quite powerful and will build a foundation for future seasons, our enthusiasm is tempered by what is inevitably going to be a prolonged period of weak consumer spending. Therefore, while we remain focused on innovation to support productivity, we are continuing to exercise disciplined expense control, reacting swiftly to changing business conditions, investing where prudent and cutting costs as appropriate."
"To this end, we have revisited our domestic store opening goals for FY10 with an eye toward reducing the number of new stores from our current run rate of 40 North American retail locations per annum to about 20, while also suspending retail store expansions. At the same time, we will continue to implement our distribution growth plans to capture the emerging market opportunity with a particular focus on China, where our growth remains strong.”
Coach Inc
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