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Coach Reports Second Quarter Earnings Per Share Of $1.23

Stocks in this article: COH

During the year-ago quarter, the company recorded certain items which yielded a substantially lower tax rate decreasing Coach’s provision for taxes. 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 non-GAAP basis, excluding these items, operating income for the prior year’s second quarter was $521 million with a 36.0% operating margin and the SG&A expense ratio was 36.2%. The increase in the SG&A expense ratio compared to prior year on a non-GAAP basis reflected the acquisition of retail businesses in Asia.

The company also announced that during the second fiscal quarter, it repurchased and retired nearly four million shares of its common stock at an average cost of $56.63, spending a total of $225 million and taking the year-to-date total to $400 million. At the end of the period, approximately $1.4 billion remained under the company’s current repurchase authorization.

For the six months ended December 29, 2012, net sales were $2.67 billion, up 7% from the $2.50 billion reported in the first six months of fiscal 2012. Net income totaled $574 million, up 2% from the $562 million reported a year ago, while earnings per share rose 5% to $2.00 from $1.90.

Second fiscal quarter sales results in each of Coach’s primary channels of distribution were as follows:

  • Total North American sales increased 1%, to $1.08 billion from $1.07 billion last year. North American direct sales rose 2% for the quarter with comparable store sales down 2%. At POS, sales in North American department stores were modestly below prior year while shipments into this channel declined.
  • International sales increased 12% to $411 million from $368 million last year. China results continued very strong, with total sales growing 40% and comparable store sales rising at a double-digit rate. Shipments into international wholesale accounts declined modestly , while underlying POS sales trends remained robust. In Japan, sales declined 2% on a constant-currency basis, while dollar sales were 7% below the prior year, reflecting the weaker yen.

During the second quarter of fiscal 2013, in North America, the company opened two retail locations - including the first company operated concession in Macy’s Herald Square – as well as 15 factory stores including four Men’s factory stores. This brought the total to 356 retail stores and 189 factory stores as of December 29, 2012. In China, 13 new locations were opened during the quarter, all on the mainland, bringing the total to 117. In Japan, Coach opened five net locations taking the total to 193 at the end of the quarter. In addition, at quarter-end, the company operated seven locations in Singapore, 27 in Taiwan, 10 in Malaysia and 48 in Korea.

Mr. Frankfort continued, “Our international growth remained robust, led by China, which is on course to generate at least $400 million in sales this year. In addition, we’re pleased with the growth of our Men’s business, which is on track to generate sales of over $600 million globally in FY13, up about 50%.”

“Looking ahead, we’re confident in our ability to address the near-term challenges in North America while leveraging the global opportunity, as we continue to evolve the Coach brand,” Mr. Frankfort concluded.

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