Coach is continuing to open new stores and grow its inventory in North America despite plunging sales of its luxury handbags in the region.
As we reported earlier, Coach saw a 6.8% decline in North American same-store sales during its first fiscal quarter that ended Sept. 28. and the company says it expects the negative trend to continue through the end of the year.
At the same time, Coach is increasing its square footage in the region by 7% through 20 new store openings and 20 expansions, including two new store concepts at flagship locations in New York and Southern California, executives said on an earnings call Tuesday.
In the most recent quarter, the company closed one full-price location and opened five discount stores, including one men’s store. There are currently 350 full-price locations and 198 discount stores in North America.
Analysts raised concerns to Coach executives on Tuesday about the expansion — as well as the company’s 6.5% growth in inventory in the most recent quarter compared to last year.
Coach CEO Lewis Frankfort said the inventory growth is necessary for Coach to succeed in transforming into a lifestyle brand by offering more than just handbags.
He specifically pointed to growth opportunities in men’s accessories and footwear as reasons to keep growing.
“We are continuing to drive our men’s business globally through new standalone and dual-gender stores and by dedicating more space for a broader men’s assortment in existing retail stores,” Frankfort said. “We remain bullish about the prospects of our global men’s business.”
Globally, Coach’s profit fell 1.6% in the most recent quarter, with net income dropping to $US217.9 million — or 77 cents per share — from $US221.4 million a year earlier.
The company is planning to expand its square footage internationally by 9% this year. Most of that growth will be in China, where same-store sales grew 35% in the most recent quarter over last year.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.