Coach Reports Second Quarter Earnings Per Share Of $1.06

Coach, Inc. (NYSE:COH) (SEHK:6388), a leading New York design house of modern luxury accessories, today announced sales of $1.42 billion for its second fiscal quarter ended December 28, 2013, compared with $1.50 billion reported in the same period of the prior year, a decrease of 6%. On a constant currency basis sales declined 3% for the quarter. Net income for the period totaled $297 million, with earnings per diluted share of $1.06. This compared to net income of $353 million and earnings per diluted share of $1.23 in the prior year’s second quarter.

Victor Luis, Chief Executive Officer of Coach, Inc., said, “During the holiday quarter, total sales fell slightly in constant currency as weakness in our North American women’s bag and accessories business offset strong growth in Men’s, footwear, and robust results in emerging Asian markets and Europe. We continued to be disappointed by our performance in North America, which was impacted by substantially lower traffic in our stores and by our decision to limit access to our e-factory flash sales site. At the same time, China results remained resilient with total sales growing about 25% and comparable store sales rising at a double digit rate. Importantly, we continued to advance our transformation initiatives and position Coach to launch Executive Creative Director Stuart Vevers’s first collection in September.”

For the second fiscal quarter, operating income totaled $436 million, compared to $527 million reported in the prior year, while the operating margin was 30.7% versus 35.0%. During the quarter, gross profit totaled $983 million compared to $1.09 billion a year ago. Gross margin was 69.2% versus 72.2% reported in the prior year. SG&A expenses as a percentage of net sales was 38.5%, compared to the 37.2% reported in the year-ago quarter.

The company also announced that during the second fiscal quarter, it repurchased and retired about 3.3 million shares of its common stock at an average cost of $52.99, spending a total of $175 million and taking the year-to-date total to $350 million. At the end of the period, approximately $1.0 billion remained under the company’s current repurchase authorization.

For the six months ended December 28, 2013, net sales were $2.57 billion, down 4% from the $2.67 billion reported in the first six months of fiscal 2013. On a constant currency basis, sales declined 1% for the period. Net income totaled $515 million compared to $574 million reported a year ago, while earnings per diluted share were $1.82 versus $2.00.

Second fiscal quarter sales results in each of Coach’s segments were as follows:
  • Total North American sales decreased 9% to $983 million from $1.08 billion last year. North American direct sales declined 8% for the quarter with comparable store sales down 13.6%. At POS, sales in North American department stores were slightly below prior year while shipments into this channel declined as planned.
  • International sales increased 2% to $425 million from $418 million last year. On a constant currency basis, International sales grew about 11%. As noted, sales in China rose about 25% and the business is on track to meet annual guidance of $530 million. In Japan, sales declined 2% on a constant-currency basis, while dollar sales were 21% below the prior year, reflecting the weaker yen. Shipments into international wholesale accounts increased significantly, as expected, due to timing of a Chinese holiday while underlying POS sales trends increased slightly.

Mr. Luis added, “We have taken the initial steps in Coach’s transformation across all aspects of the consumer experience - product, stores and marketing. Notable was the success of the Borough bag - a prelude to a comprehensive re-platforming of our women’s product assortment across bags, accessories and lifestyle categories coming this fall. We also introduced a new, dual gender lifestyle store concept in two key locations, which will serve to inform our continuing evolution of global store environments. And, in marketing, we expanded our initiatives, leveraging key style influencers in our ongoing campaign.”

“We’re particularly excited to announce that next month we will participate in our first New York Fashion Week, unveiling the inaugural collection from Stuart Vevers, whose designs will be available in-store this fall. We view this as an important milestone in our brand transformation, driving fashion credibility and relevance.

“We remain confident in our brand vision, our leadership team and our ability to execute the strategy underway. We look forward to sharing our strategic plan to drive brand vibrancy and long-term value creation during our analyst day in early June,” Mr. Luis concluded.

Coach will host a conference call to review second fiscal quarter results at 8:30 a.m. (ET) today, January 22, 2014. Interested parties may listen to the webcast by accessing on the Internet or dialing into 1-888-405-2080 or 1-210-795-9977 and asking for the Coach earnings call led by Andrea Shaw Resnick, SVP of Investor Relations & Corporate Communications. A telephone replay will be available starting at 12:00 noon today, for a period of five business days. The number to call is 1-866-352-7723 or 1-203-369-0080. A webcast replay of this call will be available for five business days on the Coach website.

The Company expects to report third quarter financial results on Tuesday, April 29, 2014. To receive notification of future announcements, please register at ("Subscribe to E-Mail Alerts").

Coach, with headquarters in New York, is a leading American marketer of fine accessories and gifts for women and men, including handbags, men’s bags, women’s and men’s small leathergoods, footwear, outerwear, watches, weekend and travel accessories, scarves, sunwear, fragrance, jewelry and related accessories. Coach is sold worldwide through Coach stores, select department stores and specialty stores, and through Coach’s website at Coach’s common stock is traded on the New York Stock Exchange under the symbol COH and Coach’s Hong Kong Depositary Receipts are traded on The Stock Exchange of Hong Kong Limited under the symbol 6388.

Neither the Hong Kong Depositary Receipts nor the Hong Kong Depositary Shares evidenced thereby have been or will be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States or to, or for the account of, a U.S. Person (within the meaning of Regulation S under the Securities Act), absent registration or an applicable exemption from the registration requirements. Hedging transactions involving these securities may not be conducted unless in compliance with the Securities Act.

This press release contains forward-looking statements based on management's current expectations. These statements can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "intend," “ahead,” “remain,” "estimate," “forward,” "on track," “on course,” "are positioned to," "continue," "project," "guidance," “target,” "forecast," "anticipated," or comparable terms. Future results may differ materially from management's current expectations, based upon risks and uncertainties such as expected economic trends, the ability to anticipate consumer preferences, the ability to control costs, etc. Please refer to Coach’s latest Annual Report on Form 10-K for a complete list of risk factors.



For the Quarters and Six Months Ended December 28, 2013 and December 29, 2012

(in thousands, except per share data)

December 28, December 29, December 28, December 29,
2013 2012 2013 2012
Net sales $ 1,419,624 $ 1,503,774 $ 2,570,384 $ 2,665,124
Cost of sales   436,945   418,392     761,132   734,574  
Gross profit 982,679 1,085,382 1,809,252 1,930,550

Selling, general and administrative expenses
  546,736   558,805     1,051,675   1,072,256  
Operating income 435,943 526,577 757,577 858,294
Interest income, net 1,953 266 3,581 302
Other income (expense)  

  (1,505 )  

  (3,577 )
Income before provision for income taxes 437,896 525,338 761,158 855,019
Provision for income taxes   140,458   172,574     245,837   280,874  
Net income $ 297,438 $ 352,764   $ 515,321 $ 574,145  
Net income per share
Basic $ 1.07 $ 1.25   $ 1.84 $ 2.02  
Diluted $ 1.06 $ 1.23   $ 1.82 $ 2.00  

Shares used in computing net income per share
Basic   279,085   282,693     280,236   283,630  
Diluted   281,534   286,223     283,000   287,358  



At December 28, 2013, June 29, 2013 and December 29, 2012

(in thousands)

December 28, June 29, December 29,
2013 2013 2012
Cash, cash equivalents and short term investments $ 798,835 $ 1,134,891 $ 858,657
Receivables 228,631 175,477 223,041
Inventories 553,026 524,706 493,659
Other current assets   207,184   235,873   273,010
Total current assets 1,787,676 2,070,947 1,848,367
Property and equipment, net 748,336 694,771 701,273
Other noncurrent assets   1,007,805   766,179   729,789
Total assets $ 3,543,817 $ 3,531,897 $ 3,279,429
Accounts payable $ 135,128 $ 178,857 $ 152,571
Accrued liabilities 567,282 543,153 594,140
Current portion of long-term debt   485   500   22,225
Total current liabilities 702,895 722,510 768,936
Long-term debt

485 485
Other liabilities 410,195 399,744 427,676
Stockholders' equity   2,430,727   2,409,158   2,082,332
Total liabilities and stockholders' equity $ 3,543,817 $ 3,531,897 $ 3,279,429


Store Count

At December 28, 2013 and September 28, 2013

As of Net As of

Directly-Operated Store Count:



North America 548 8 556
Japan 196 0 196
China (PRC, Hong Kong & Macau) 132 10 142
Asia - Other 94 4 98
Europe 20 4 24

Copyright Business Wire 2010

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