Most Recent Articles In Business
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COACH PROFITS FALL: After posting a 29 percent decline in third-quarter profits last week, Coach Inc.’s CEO warned that the “new normal” is hard to adjust to. “I don’t believe conditions will ever return to what they were before the recession,” said Lew Frankfort, chairman and CEO of the accessories company. Coach last week posted third-quarter profits of just $114.9 million, or 36 cents a diluted share, versus $162.4 million, or 46 cents, in the same year-ago quarter. Although comparable-store sales have stabilized to pre-holiday levels at Coach’s North American stores, the company is continuing to modify its pricing paradigm to better cater to a wary consumer. For the next quarter or two, sales may decline on a year-over-year basis as the firm introduces new collections with an updated, reduced price range, but Frankfort said the plan was to improve the conversion rate of consumers and increase the average ticket price. For the three months ended March 28, sales dipped by 0.6 percent to $740 million from $744.5 million. For the nine months, income dropped 16.1 percent to $477.6 million, or $1.46 a diluted share, from $569.5 million, or $1.56, last year. Sales for the nine months rose 2.2 percent, to $2.45 billion, from $2.40 billion.
— VICKI M. YOUNG
DSW’S FATE: Although Filene’s Basement spent less than a week on the sale block, not everyone is relieved about the discount retailer’s new owner. The April 21 acquisition by Buxbaum Group, which specializes in liquidations and turnarounds, could mean the 25-store Filene’s Basement will close, which, in turn, could negatively impact DSW Inc., also largely owned by current Filene’s Basement parent Retail Ventures Inc. According to its most recent annual filing, DSW allocated $5.7 million in shared services expense to Filene’s Basement for full-year 2009, and as of January, was still owed $1.8 million from last year’s shared services contract. DSW also operated the footwear departments at Filene’s Basement to the tune of $40 million in revenue last year. Those factors could cost DSW $7 million in operating profit, or 10 cents a share, for the current year, according to Christopher Svezia, an analyst at Susquehanna Financial Group. “The potential bankruptcy or sale of Filene’s Basement could have negative ramifications for DSW,” he wrote in a research note. Svezia did point out that, with its recent divestiture of Filene’s Basement and Value City last year, RVI is now essentially a holding company for DSW, and the company may need to reduce its holdings to raise cash. “Increasing the float and reducing RVI’s ownership,” he continued, could be a positive for DSW.
— JESSICA PALLAY
COLUMBIA CHALLENGED: Columbia Sportswear Co. continued to stumble during the first quarter, as backlogs built up and the strong U.S. dollar took a bite out of international sales. The company reported a 65 percent drop in profits to $6.9 million, or 20 cents a diluted share, for the quarter ended March 31, 2009, versus $19.9 million, or 56 cents, during the same quarter last year. Sales dipped 9 percent to $272 million, from $297 million in the first quarter of 2008, with the biggest decline, 24 percent, in Europe. The Portland, Ore.-based company’s footwear revenues fell 22 percent to $40 million, while its sportswear sales decreased 14 percent to $138 million. As a result of a 15 percent drop in the company’s fall wholesale backlog, Columbia now estimates 2009 wholesale net sales to decline by a percentage in the mid-teens and estimated second-quarter revenues to decline by the low to mid-20s. “Our wholesale backlog reflects, in part, the weak global retail environment during the first quarter, coupled with the financial and credit market challenges that have led many of our customers to continue reducing their planned inventory levels for the remainder of 2009,” Tim Boyle, Columbia’s president and CEO, said in a statement.