Coach Earnings Fall Flat

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When Coach Inc. (NYSE: COH) released its fiscal first-quarter earnings report before the markets opened on Tuesday, it posted $0.45 in earnings per share (EPS) and $1.04 billion in revenue. Thomson Reuters consensus estimates had called for $0.45 in EPS and revenue of $1.07 billion. The same period of last year reportedly had EPS of $0.41 and $1.03 billion in revenue.

Total North American Coach brand sales decreased 3% on both a reported and constant currency basis to $545 million, versus $561 million last year. North American direct sales were flat on a dollar basis for the quarter.

International Coach brand sales rose 7% to $395 million on a reported basis from $369 million last year and 3% on a constant currency basis. Greater China sales were approximately even with prior year in dollars and increased 5% on a constant currency basis.

The net sales for the Stuart Weitzman brand totaled $88 million for the first fiscal quarter, compared to $87 million reported in the same period of the prior year, affected by wholesale shipment timing within the fiscal year.

In terms of guidance, the company continues to expect revenues for fiscal 2017 to increase by low-to-mid single digits, including an expected benefit from foreign currency of approximately 100 to 150 basis points based on current exchange rates. Also Coach continues to project double-digit growth in both net income and earnings per diluted share for the year. Essentially, guidance is unchanged from its August levels.

On the books, Coach cash, cash equivalents and short-term investments totaled $1.53 billion at the end of the quarter, up from $1.28 billion in the same period from last year.

Victor Luis, CEO of Coach, commented:

We are pleased with our performance in the quarter, highlighted by continued positive comparable store sales in North America and growth internationally. We remained focused on elevating the perception of the Coach brand through compelling product, differentiated store environments and emotional marketing. At the same time, we implemented the strategic actions necessary to reposition the brand and streamline our distribution in the promotional North American department store channel. Despite this deliberate pullback, we achieved growth across key financials, including sales, gross profit and operating income, as well as double-digit earnings growth.

Shares of Coach closed Monday at $35.89, with a consensus analyst price target of $43.98 and a 52-week trading range of $28.70 to $43.71. Following the release of the report, the stock was up about 0.6% at $36.10 in early trading indications Tuesday.