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Coach Reports Third Quarter Earnings Of $0.77, Up 24% On A 17% Sales Increase

Stocks in this article: COH

Coach, Inc. (NYSE: COH, SEHK: 6388), a leading marketer of modern classic American accessories, today announced sales of $1.11 billion for its third fiscal quarter ended March 31, 2012, compared with $951 million reported in the same period of the prior year, an increase of 17%. Net income for the quarter totaled $225 million, with earnings per diluted share of $0.77. This compared to net income of $186 million and earnings per diluted share of $0.62, in the prior year’s third quarter, increases of 21% and 24%, respectively.

The company also announced that its Board of Directors has voted to increase its cash dividend by 33%, raising it to an annual rate of $1.20 per share starting with the dividend to be paid to stockholders in July 2012.

Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc., said, “We’re pleased with the very strong top and bottom-line performance we achieved in the third quarter, as well as the expansion of our operating margin. Our results demonstrated the brand’s resonance across channels, categories and geographies and reflected the effectiveness of our new pricing and promotional strategies in our North American factory business. Further, the announcement today of a 33% increase in our dividend reflects our financial strength and our confidence in Coach’s business outlook.”

For the third fiscal quarter, operating income totaled $337 million, up 21% from the $280 million reported on a non-GAAP basis in the comparable year ago period, while the operating margin was 30.4% versus 29.4% reported in the prior year. During the quarter, gross profit increased 18% to $818 million from $692 million a year ago. Gross margin expanded 100 basis points on a year-over-year basis at 73.8% from 72.8%. SG&A expenses as a percentage of net sales was 43.3%, compared to the 43.4% reported in the year-ago quarter on a non-GAAP basis. During the year-ago quarter, the company recorded certain items including a favorable tax settlement. As a result, it made charitable contributions which precisely offset the benefit of the tax settlement to net income and earnings per share. Therefore, on a GAAP basis, operating income for the prior year’s third quarter was $254 million with a 26.7% margin and the SG&A expense ratio was 46.1%.

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