Continued North American Stumbles Slam Coach

Hurt by slumping North American sales, Coach (NYSE:COH) disclosed a 16% drop in fiscal second-quarter earnings on Wednesday, driving the luxury retailer’s shares 7% lower.

The worse-than-feared results highlight the increased competition facing Coach from the likes of Fifth & Pacific Co.’s (NYSE:FNP) Kate Spade and Michael Kors Holdings (NYSE:KORS).

Coach said it earned $297.4 million, or $1.06 a share, last quarter, compared with a profit of $352.8 million, or $1.23 a share, a year earlier. Analysts had called for EPS of $1.11.

Revenue fell 5.6% to $1.42 billion, trailing the Street’s view of $1.48 billion. International sales ticked up 2% to $425 million.

North American same-store sales plunged 13.6% last quarter, compared with a 6.8% decline in the first quarter and marking the third-straight decelerating quarter. It was also the first double-digit decline since the economic collapse in December 2008, according to StreetAccount.

Total North American sales dropped 9% to $983 million.

Coach acknowledged weakness in its North American women’s bag and accessories business, which offset growth in men’s footwear and upbeat results in Asia and Europe. Sales in China soared about 25%.

“We continued to be disappointed by our performance in North America, which was impacted by substantially lower traffic in our stores and by our decision to limit access to our e-factory flash sales site,” Coach CEO Victor Luis said in a statement.

Coach said it repurchased about 3.3 million shares of common stock at an average cost of $52.99 during the quarter, costing the company about $175 million.

Shares of New York-based Coach dropped 7.61% to $48.55 in premarket trading on Wednesday, putting them on track to extend their 12-month slump of about 13%.

"We remain confident in our brand vision, our leadership team and our ability to execute the strategy underway,” Luis said.