(Bloomberg) -- Luxury-goods sellers are keeping the champagne on ice.
Despite posting earnings that topped analysts’ estimates for their most recent quarters, Coach Inc., Ralph Lauren Inc. and Michael Kors Holdings Ltd. all offered less-than-rosy forecasts. The gloomy outlooks weighed on shares of Coach and Michael Kors, while Ralph Lauren’s stock rose on optimism that a turnaround plan from its new chief executive officer is gaining traction.
Executives at the companies -- which sell merchandise ranging from $400 handbags to $5,000 pea coats -- say decreased tourism to the U.S. and dwindling spending are hurting sales at department stores as well as their own locations. And in a break from recent practice, they’re trying to avoid resorting to extreme discounts to move merchandise for fear that the tactic will ruin their brands’ images among consumers. With no sign of shoppers falling back in love with mall shopping anytime soon, all three companies are working to reduce their reliance on department stores, even though the strategy promises short-term pain.
“The amount of promotional activity from many of the people who carry our line was at its all-time high, and we had to compete to be able to move our inventories during that period of time,” Michael Kors CEO John Idol said on a conference call. “That’s the whole cycle we are going to get ourselves out of.”
Michael Kors’s first-quarter profit was 88 cents a share, excluding some items, topping analysts’ 74-cent average projection. Despite the beat, the company held its forecast for profit in the current year steady at $4.56 to $4.64 a share.
The company has benefited from growth in Asia -- led by a decision to buy back its Greater China license this year -- as well as its nascent effort to win new customers by expanding its menswear lines. Yet Idol said that progress was “muted by the continued decline in mall traffic trends as well as a decrease in tourism in certain major cities.”
The shares fell 1.1 percent to $49.55 at 9:37 a.m. in New York. Michael Kors had gained 25 percent this year through Tuesday.
Idol’s comments echo sentiments expressed by Coach CEO Victor Luis, whose company reported results on Tuesday. The handbag maker said revenue for fiscal 2017 will increase at a low-to-mid-single-digit percentage rate, and earnings per share will grow at a double-digit pace. The projections were roughly in line with analysts’ expectations for a 4 percent revenue gain and a 15 percent increase in adjusted earnings.
Since the outlook followed a fourth-quarter earnings beat -- the company posted profit of 45 cents a share versus analysts’ 41-cent projection -- the stock fell 2.2 percent on Tuesday. The shares slipped 0.5 percent to $40.33 on Wednesday.
Only Ralph Lauren has managed to cheer investors with its most recent report. The fashion house posted first-quarter profit of $1.06 a share, excluding some items. Analysts projected 89 cents. That sent the shares up as much as 10 percent to $104.60.
While it’s joining Coach and Michael Kors in pulling back from department stores, Ralph Lauren also is slashing 1,000 jobs, closing stores and hiring new executives as part of new CEO Stefan Larsson’s “Way Forward” plan. The initiative centers on refocusing the company on its three core brands: Ralph Lauren, Polo and Lauren.
Despite the progress, Ralph Lauren declined to raise its profit forecast. It reaffirmed projections that revenue would decrease at a low-double-digit percentage rate.
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