Coach fiscal 3Q profit falls

NEW YORK (AP) — Coach Inc. on Tuesday said profit fell 29 percent in the fiscal third quarter, as sales were nearly flat as the economy sputtered and the company implemented a cost-saving plan.

The luxury handbag and accessories maker also said it will begin paying a cash dividend of 30 cents annually.

Profit for the three months ended March 28 fell to $114.9 million, or 36 cents per share, from $162.4 million, or 46 cents per share last year. Excluding charges related to its cost-cutting plan, profit was 38 cents per share.

Revenue edged down less than 1 percent to $739.9 million from $744.5 million a year earlier.

Analysts polled by Thomson Reuters expected a profit of 36 cents per share on revenue of $711.4 million. Analyst estimates typically exclude one-time charges.

The cost cutting plan is in addition to the company's previous actions to eliminate merit-based salary increases and freeze hiring except for certain areas deemed critical. Coach expects to save $50 million before taxes with the cuts during the next fiscal year.

During the quarter, Coach cut 150 U.S. corporate staff, closed four retail stores and closed a sample-making plant in Italy.

"The steps that we're taking to reduce our expense structure will help position Coach to enhance our profitability," said Lew Frankfort, chairman and chief executive.

Grossmargin fell to 71 percent from 75 percent due to deeper factory store promotions and lower price points the company began rolling out in the prior quarter.

Direct-to-consumer sales rose 9 percent to $634 million as sales in North American stores open at least one year, a key retail metric known as same-store sales, fell 4.2 percent.

Indirect sales fell 35 percent to $162 million as the company decreased shipments to department stores, which have been underperforming.

Even as the company cuts costs and makers of luxury goods are being hit particularly hard due to the ailing economy, Coach said it will begin quarterly dividend payments of 7.5 cents per share on June 29 to shareholders of record as of June 8. The new dividend "reflects our financial strength and our confidence in Coach’s business outlook," Frankfort said.