Coach Stock Getting Crushed Calling 2013 "Investment Year"

Coach, Inc

reported disappointing second quarter comparable store sales. A very lackluster 1.7 percent increase was far below consensus estimates of 6 percent. And a long way from first quarter sales of 6.7 percent, further indicating the retrenchment of the consumer in the second quarter. The luxury handbag maker announced this as an investment year. Coach will accelerate the acquisition of domestic-retail operations in key Asian markets. Coach is getting hammered down over 18 percent trading $49.22 down $11.36 a share on heavy volume. Investors are bailing on consumer nondiscretionary stocks in the wake of weak consumer spending entering the second half of the year. Consumer spending released at 8:30 EST was flat. Looking back, Coach reported sales of $1.16 billion for its fourth fiscal quarter ended June 30, 2012, compared with $1.03 billion reported in the same period of the prior year, short of analyst's expectations of $1.2 billion. Net income for the quarter totaled $251 million, with earnings per diluted share of $0.86. This compared to net income of $202 million and earnings per diluted share of $0.68, in the prior year's fourth quarter, increases of 24% and 27%, respectively. Net sales rose 15 percent to $4.76 billion from the prior fiscal year. Net income increased 18 percent to $1.04 billion, up from last year's $881 million rise. Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc., said, “I'm pleased that we were able to once again achieve strong double-digit sales and earnings gains for our fiscal fourth quarter and full year.” Despite strong sales abroad particularly in China, the US consumer led to lower than expected growth in factory stores. The North American consumer has become far more cautious about their spending habits. Coach shares now trading below both the 50 and 200 day moving averages and 25% below its 52 week high should seep in to other high end retailers. Socks to trade in sympathy with Coach, Tiffany & Co.

, Ann Inc

, The Talbots, Inc.

and Guess?, Inc.

Polo Ralph Lauren,

. All high end consumer discretionary stocks will be under pressure following the price action in Coach this morning. Economic headwinds continue to persist with stubbornly high unemployment, deteriorating economic metrics and the looming fiscal cliff.