By Chelsey Dulaney and Lauren Pollock
Coach Inc. posted lower earnings and revenue in its December
quarter but highlighted a slight improvement in sales at its North
American locations.
Chief Executive Victor Luis said the quarter was in line with
the company's expectations, though the strengthening of the U.S.
dollar weighed on results.
"We were pleased with the sequential improvement in our North
American comparable-store sales--notably in the bricks and mortar
channel--and the growth of our international businesses," he
said.
Sales at existing North American locations declined 22% in the
quarter, easing from the 24% drop in the October period.
That helped send shares up 7% premarket, while earnings also
declined less than expected.
Coach's sales have sank in recent years as customers have scaled
back purchases of its upscale handbags. The company has responded
by expanding its focus from primarily accessories to a full
lifestyle brand with apparel and shoes. Earlier this month, Coach
agreed to buy upscale shoe brand Stuart Weitzman in a deal valued
at up to $574 million, a rare acquisition for a company that
typically focuses on organic growth.
Meanwhile, Coach has been adding categories and expanding in
online sales, men's collections and overseas as it faces challenges
from rivals such as Michael Kors Holdings Ltd. and Kate Spade &
Co.
Coach said its North American sales dropped 20% to $785 million
in the quarter ended Dec. 27.
International sales edged down 1% to $421 million. Excluding
currency impacts, international sales rose 5%.
Overall, Coach's profit was $183.5 million, or 66 cents a share,
down from $297.4 million, or $1.06 a share, a year earlier.
Excluding charges and acquisition costs, earnings were 72 cents
a share.
Sales slipped 14% to $1.22 billion from $1.42 billion a year
earlier. Excluding foreign currency impacts, sales declined
12%.
Analysts polled by Thomson Reuters had expected per-share
earnings of 66 cents and revenue of $1.23 billion.
Gross margin was 68.9%, narrowing from 69.2% a year earlier.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com and Lauren
Pollock at lauren.pollock@wsj.com
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