Coach Reports Sales Improvement - Update
January 26 2016 - 11:58AM
Dow Jones News
By Suzanne Kapner
Coach Inc. reported its first quarterly sales gain since June
2013, but all credit goes to its recently acquired Stuart Weitzman
brand.
Coach's total sales grew 4% to $1.27 billion in the period, and
excluding currency fluctuations, sales rose 7%. The company's core
Coach brand, which accounts for the bulk of profit and revenue
continued to struggle with sales down 3% globally and 7% in North
America. But that is an improvement over the same period a year
ago, when Coach sales in North America fell 20%.
Its shares rose 9.4% to $33.20 in recent trading, its largest
percentage increase in about three years.
After overexpansion and heavy discounting damaged the brand,
Chief Executive Victor Luis has scaled back promotions, shut
underperforming stores and upgraded design and material
quality--efforts that have come as fellow handbag makers Michael
Kors Holdings Ltd. and Kate Spade & Co. have similarly
struggled with a slowdown in the overall handbag market.
Mr. Luis said that overall, the North American premium women's
handbag market didn't grow at all in the December quarter. He added
that an increase in the number of units sold was offset by lower
average prices given a higher level of promotional activity.
Despite the slowdown in the broader market, Mr. Luis stuck to a
previous forecast that sales for the Coach brand would begin to
grow in the June quarter, when nearly half of the company's retail
stores will have been remodeled.
The money spent to turn around the business has dented profits.
Coach earned $170 million in the recent period, down from $184
million, a year earlier. The current figures included $14 million
in charges stemming from its strategic shifts. Coach's gross margin
slipped to 67.4% from 68.9% a year earlier.
Stuart Weitzman's sales totaled $94 million in the period. Mr.
Luis said the brand, which Coach agreed to buy in January 2015,
performed above expectations in the holiday period on strong boot
sales despite the unusually warm weather.
Coach, meanwhile, continues to see rising sales outside of the
U.S. In mainland China, the company logged a double-digit sales
increase, despite a slowdown in the world's second-biggest economy
that is hurting other American companies. Coach also said it had
double-digit sales growth in Europe.
Lisa Beilfuss contributed to this article
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
January 26, 2016 11:43 ET (16:43 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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