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Coach, Inc. (COH)’s Dud Won’t Sink Michael Kors Holdings Ltd (KORS)

Coach, Inc. (NYSE:COH) isn’t flying first class today after a soft quarterly report, but that shouldn’t scare investors away from Michael Kors Holdings Ltd (NYSE:KORS) as the smaller retailer of luxury handbags gears up to report its own fresh financials next week.

Coach, Inc. (NYSE:COH)

Yes, Coach, Inc. (NYSE:COH)’s report was a disappointment. Net sales climbed a weaker-than-expected 6% to $1.22 billion, and adjusted net income inched a mere 1% higher. North American comps actually declined 1.7%. Making matters worse, a pair of executives will be leaving the company at the end of next month.

As a bellwether for luxury retail, it’s easy to get alarmed. Wasn’t this the same Coach, Inc. (NYSE:COH) that increased its quarterly dividend two months ago, signaling to investors that its near-term prospects were rosier than this?

It was a big surprise to see Joe’s Jeans Inc (NASDAQ:JOEZ) whiff badly two weeks ago. The luxury denim retailer’s net sales growth of 8% was roughly half what Wall Street expected. Joe’s Jeans Inc (NASDAQ:JOEZ) Jeans was held back by a brutal 6% slide in same-store sales.

If folks aren’t aping celebrities in paying at least $158 for a pair of jeans at Joe’s Jeans Inc (NASDAQ:JOEZ) or $458 for a leather satchel at Coach, Inc. (NYSE:COH), aren’t all premium retailers in trouble?


For starters, Michael Kors Holdings Ltd (NYSE:KORS) is growing a lot faster than Coach, Inc. (NYSE:COH) or Joe’s Jeans.

Revenue at Michael Kors Holdings Ltd (NYSE:KORS) surged 57% in its previous quarter, with net income more than doubling. The key catalyst here was a 37% spike in comparable-store sales. If you think that’s something, comps soared 41% during the quarter before that.

It would be a major shock if Michael Kors Holdings Ltd (NYSE:KORS) follows Coach, Inc. (NYSE:COH) and Joe’s Jeans into negative comps next week.

More to the point, remember that 41% burst in same-store sales at Kors during the holiday quarter? Coach’s North American comps slid 2% during its holiday quarter.

Michael Kors Holdings Ltd (NYSE:KORS) and Coach may sell pricey purses and accessories, but that’s about the only thing that they have in common these days.

The market knows that, and it’s likely why shares of Michael Kors Holdings Ltd (NYSE:KORS) opened higher this morning despite the hit that Coach is taking.

Kors will be just fine next week.

The article Coach’s Dud Won’t Sink Michael Kors originally appeared on is written by Rick Munarriz.

Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Coach.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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