Coach Tops Expectations as Sales Improve -- Update
April 26 2016 - 12:22PM
Dow Jones News
By Suzanne Kapner
Coach Inc.'s namesake brand returned to growth in North America,
the first quarterly sales increase in the handbag maker's home
market in nearly three years.
Sales of the core Coach brand rose 1% to $499 million in North
America and rose 5% to $448 million overseas, a sign the company's
turnaround efforts are starting to take hold. Sales had fallen
sharply after overexpansion and heavy discounting damaged the
brand.
Coach Chief Executive Victor Luis said the company's efforts to
add new, more stylish designs, upgrade stores and scale back
promotions were finally paying off. He said the company's average
unit retail, a measure of what customers are willing to pay, was
above $300 per handbag for the first time since fiscal year
2009.
"The Coach brand is very much on its way to evolving from its
specialty retailer and accessories brand to a true house of fashion
design," Mr. Luis said on a conference call.
On Tuesday, the company said it would eliminate about 300 jobs,
or 10% of its corporate workers, and shuffle its management. Two
executives will leave the company, including Gebhard Rainer,
president and chief operating officer.
As part of the executive shuffle, Andre Cohen was promoted to
president of North America and global marketing, while Todd Kahn
was promoted to president, chief administrative officer and
secretary.
Coach said it would take a charge of $65 million to $80 million
in the current quarter stemming from the layoffs and other
moves.
Coach shares rose 1.9% in midmorning trading, changing hands at
$40.94. The stock is up more than 40% since the end of
September.
In all, the company reported a profit of $112.5 million, up from
$88.1 million, a year earlier. Quarterly revenue increased 11% to
$1.03 billion for the three months to March 26. Stuart Weitzman,
which Coach acquired last year, had sales of $79 million in the
period.
But the company isn't entirely out of the woods. Sales at
Coach's retail stores excluding newly opened or closed locations in
North America were unchanged from a year ago, while e-commerce
sales rose just 1% and sales at department stores fell by around
5%.
Mr. Luis said he expects comparable sales at the retail
locations to turn positive in the current period, when about half
of the company's stores will have been remodeled.
Coach's international sales rose 5% on strength in China and
Europe, despite a negative impact from the strong dollar. The
company said total China sales rose 2% on a constant currency
basis, as strength in the mainland offset weakness in Hong Kong and
Macau.
Lisa Beilfuss contributed to this article.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
April 26, 2016 12:07 ET (16:07 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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