Luxury handbag maker Coach is showing signs of improvement. The company reported its slowest decline in nine quarters, evidence that its efforts to revive its image and win back customers are starting to pay off.
Coach’s sales declined by just 0.8 percent in the last quarter. In the previous three quarters, sales declined by 11 to 16 percent. North American same-store sales declined by 9.5 percent. That was the smallest drop in two years.
Coach’s net income declined by 19 percent to $96.4 million. Excluding items, the company earned 41 cents per share. Analysts had expected revenue of $1.04 billion and earnings of 40 cents per share.
About 35 percent of Coach’s sales come from international markets. Sales in China rose 3 percent, and sales in Japan were up 6 percent. Coach maintained a high single-digit growth sales forecast for 2016.
Coach’s stock had the highest percentage gain on the S&P 500. The company also reported quarterly profits that were better than expected because it ran fewer promotions.
Coach saw its appeal as a luxury brand decline due to years of overexposure. That allowed newer competitors, such as Michael Kors Holdings Ltd and Kate Space & Co., to succeed.
The label is undergoing a transformation. Coach is renovating stores and spending money to revive its brand. Creative director and designer Stuart Vevers is also creating new styles to appeal to younger consumers. The youthful new designs are intended to attract millennials and fashion-conscious customers. Coach has tried to maintain its image and reputation as a luxury brand by cutting back on flash sales and focusing on more expensive handbags, such as its Ace and Nomad designs.
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