By Lisa Beilfuss
Coach Inc. said profit plunged in its latest quarter as the
luxury retailer reported deteriorating sales and
restructuring-related charges.
But results beat expectations and the company issued upbeat
guidance for the newly-started business year, pushing shares 4%
higher premarket.
Coach said it expects full-year revenue to grow by low-single
digits, adjusted for currency. Analyst have expected 1% revenue
growth, according to Thomson Reuters. The recently acquired Stuart
Weitzman business will help drive results, Coach said.
For the quarter ended June 27, the retailer reported a 12% sales
drop from a year earlier, with sales at existing Coach retail
stores down 19% in North America and international same-store sales
down slightly.
The declines come as Chief Executive Victor Luis tries to turn
the company around after overexpansion and heavy discounting
tarnished the handbag and accessories maker. Coach has dialed back
on promotions, improved its designs and material quality and closed
underperforming stores.
Fewer discounts in the latest quarter helped Coach's gross
margin rise to 68.5% from 62.2%, but lower promotional activity cut
into sales.
Overall profit plummeted to $11.7 million from $75.2 million. On
a per-share basis, earnings fell to 4 cents from 68 cents.
Excluding items, earnings per share fell to 31 cents from 59
cents.
Revenue declined 12% to $1 billion. The Stuart Weitzman
acquisition, completed in May, added $43 million, Coach said.
Stripping out currency effects, sales fell 8%.
Analysts anticipated 29 cents in per-share profit on $973
million in revenue.
The company booked $66 million in restructuring-related costs
and $21 million in charges associated with the Stuart Weitzman
purchase.
International sales fell 5%, hit by a stronger U.S. dollar that
makes the company's goods more expensive abroad. Excluding currency
fluctuations, international sales rose 3%.
Shares of Coach fell 19% this year through Monday's close.
Handbag rivals Kate Spade & Co. and Michael Kors Holdings Ltd.,
down 37% and 48% this year, respectively, are due to report
quarterly results later this week.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
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