Coach (NYSE: COH) will close around 70 underperforming stores in fiscal 2015, and projected lower revenues than forecast for fiscal 2015.
Sales at North American stores open at least a year will fall at a mid- to high-teens percentage rate in the year through June 2015, executives said on a conference call with investors and analysts. Plus, North American comparable-store sales plunged 21 percent in the quarter ending March 29, steeper than the 15 percent slide analysts had projected.
CEO Victor Luis has been working to transform Coach into a lifestyle brand, retailing all types of products, from high-heeled shoes to trench coats, after facing increased competition in the handbag segment from the likes of Michael Kors.
However, analysts are concerned about Coach's business strategy. Earlier this month, Coach said it will start discounting purses at its North American full-price stores twice a year, breaking with a tradition of being one of the few fashion and luxury companies that refused to discount goods in its domestic shops.
"It's been my concern that the brand has declined," Corinna Freedman, an analyst at Wedbush SecuritiesFreedman, told Bloomberg. "They expanded too much into outlets and trained their customer to think of the brand as a discount brand. Now they've got to retain that customer and bring more customers into the fold, and they're competing in a landscape where more nimble players are eating off their plate."
On the investor call, Luis acknowledged that the company is at a crossroads and will undertake a number of major initiatives during the next 12 to 18 months, including reducing promotional levels, introducing new advertising, shuttering stores and changing its product offerings.
Coach's problems stem from several bad quarters and disappointing holiday sales in 2013. In January, the retail chain reported that its North American same-store sales plunged 13.6 percent in its second fiscal quarter ending December 28, the worst on record since 2000. At the time, the company said tougher competition and declining store traffic were to blame for the dismal results.
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