Coach's Results Strong, Faces Tough Quarter
Despite a strong first quarter, Coach is forecasting weaker sales going forward, primarily due to the warm autumnal weather. The bag-and-accessories retailer is also pressured by the protracted housing slump and rising fuel prices. Many economists believe customers will tighten their wallets until conditions improve.
As a mid-level luxury retailer, Coach may be in for a particularly rough holiday season. While the upper end is usually immune to macroeconomic shifts, middle-to-above-middle class consumers may hold off on buying $300-plus handbags and temporarily defect to discount chains.
Coach predicts second-quarter profits will be 68 cents a share, with sales of $970 million. That's below the Street's call of 70 cents a share, on sales of $984.5. But despite its strident warning for the future, Coach's profits in the first quarter rose 23.2% to $154.8 million from $125.6 million a year ago.