Coach to Lower Prices as Profit Falls 14% in 2Q

New York City Coach Inc. has announced that its second-quarter earnings fell 14% to $216.9 million compared to earnings of $252.3 million from a year ago.

The company also said it is lowering its prices 10% to 15% and offering more handbags under $300.

Price cuts have begun and will be completed during the course of fiscal 2010. Coach also plans to cut the number of new stores it opens in North America to 20 from 40 in 2010 and to halt expansion of existing stores. Coach’s fiscal 2009 ends in June.

Coach said it also will make less merchandise for off-price stores while shifting more of the products that don't sell at retail stores to its outlet stores, where traffic has kept growing.

Coach reported this month that revenue for its second quarter, ended Dec. 27, fell nearly 2% to $960.3 million. Same-store sales fell more than 13%.

Lower shipments to U.S. department stores hurt indirect sales, which fell 19% to $143 million. Direct-to-consumer sales grew 2%to $818 million.

The company said it will still offer a wide array of products above $300, but Mike Tucci, president of the retail division, North America, said "over time, our objective is to add more collection and weight to this under-$300 price to gain share in a changed consumer marketplace."

In recent years, the average price of a Coach handbag has risen to between $330 and $340.