Coach (COH) became the latest high-end retailer to see its shares implode this morning after the company reported a 6% drop in revenue and earnings per share of $1.06, a nickel shy of expectations. Coach CEO Victor Luis attributed the disappointing results to particularly weak sales of high-end handbag sales in North America.
Coach shareholders are getting abused to the tune of about 7% in early trading but it could be worse. Already in 2014 Lululemon (LULU) stock has lost a 1/5th of its value and shares of Best Buy (BBY) of 40% lower than where they started the year.
In the attached video Heather Hughes of SunAmerica says it’s too early for investors to draw negative inferences about the economy based on what the retailers are saying, but that consumer spending overall needs to stay strong for the economic recovery to continue. More than two thirds of the total Gross Domestic Product in the U.S. flows directly from consumer. At least thus far it seems as though the apparent weakness in holiday sales is specific to a handful of predominantly off-line retailers, but if the spending doesn’t show up somewhere, what’s already a weak recovery could then reverse entirely.
Hughes says investors should keep an eye on the jobs data. As long as wages and employment keep moving in the right direction she expects the economy to continue to plow along its path of muted growth.
That may not be much solace to Coach shareholders today but the overall market seems to be in decent shape, at least for the time being.