NEW YORK (AP) -- The luxury retail sector took a hit Tuesday after Coach revealed weak U.S. sales in its quarterly earnings report, sending investors fleeing from an industry that had been largely impervious during much of the economic downturn.
While Coach Inc. reported that revenue rose 13 percent in the quarter, backed by strong sales overseas, the handbag and accessories company experienced weaker-than-expected growth at its factory stores in North America. Its $1.16 billion in revenue fell short of the $1.2 billion that analysts polled by FactSet forecast.
Even though the U.S. economy is still on unstable footing, wealthier shoppers had mostly continued to spend unlike much of the poor and middle class that saw massive job losses.
Coach's stock dropped 16 percent, or $9.87 to $50.71 in midday trading. Shares of Tiffany and Co. slid 4 percent to $55.07.
Saks Inc. fell 8 cents to $10.52 while shares of Nordstrom Inc. dropped 27 cents to $54.28.
Randal Konik of Jefferies & Co. downgraded Coach to "Hold" from "Buy" and slashed its price target to $55 from $92.
The analyst said in a client note that it was not a good sign that the company had to reinstate in-store coupons at its factory stores late in the quarter and is facing increased competition from rival Michael Kors Holdings Ltd.
Michael Kors' shed 44 cents to $41.04.
Canaccord Genuity's Laura Champine kept a "Hold" rating for Coach and left its price target at $71, but lowered her first-quarter earnings forecast to 75 cents per share from 85 cents per share. She cut her full-year outlook on Coach to $3.91 per share from $4.10 per share.