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Coach Beats Estimates; Investors Concerned About Drop in U.S. Sales

Anirvan Ghosh

Coach Inc, the largest U.S. luxury handbag maker, beat analyst estimates as fourth quarter profit rose, helped by rising sales of men’s products and better performance in international markets such as China.

Shares jumped 4.4% at the open, down slightly from its pre-market high.

The company also said that sales in North America, its biggest market, fell 16%. That mattered to investors on StockTwits, because this meant Michael Kors, which reported 30% higher sales in the U.S., has taken business away from Coach, and the trend is likely to continue.

Investors said the results seem better because expectations were low, and hailed Michael Kors as the new market leader.

Coach’s net sales were down 7 percent at $1.14 billion in the quarter, beating the average analyst estimate of $1.1 billion. Net income plummeted 66 percent to $75.3 million, or 27 cents a share. Excluding special items, it earned 59 cents a share. Analysts had expected 53 cents.

Coach has taken steps to regain market share and fend off heated competition from Michael Kors. It has expanded beyond women’s handbags and added men’s leather sunglasses and clothing. Coach has also moved into more sophisticated bags and refurbished its stores. Those steps don’t seem to have worked in the U.S., a fact that investors clearly noticed. Sentiment on StockTwits was just 64% bullish for Coach, compared with 77% for Michael Kors.

Before today, Coach had slumped 39 percent this year, compared with a 4.9 percent gain for the Standard & Poor’s 500 Index, as it downsized to fix its business and lost customers as fashion trends among 20-35 year olds changed.

 Follow @anirvanghosh on StockTwits.