Coach Pulls Off Unexpected Gains in Q1 Despite Turnaround Pressures

Coach Spring 2017 Collection
Coach spring '17 shoes.
Giovanni Giannoni/Fairchild.

Despite expected pressures from the company’s ongoing turnaround efforts as well as heavy department store promotions, Coach Inc. managed to pull off several important gains in its first quarter, reported before the market open today.

The New York-based company and owner of the Stuart Weitzman brand said its Q1 reported net income advanced 22 percent year-over-year, to $117 million, or 42 cents per diluted share. Adjusted net income for the quarter totaled $126 million, or 45 cents per diluted share, and was in line with Wall Street’s forecasts.

Meanwhile, net sales increased 1 percent year-over-year on a constant currency basis, to $1.04 billion, but missed market watchers’ expectations for net sales of $1.07 billion. Comparable store sales also gained 2 percent year-over-year.

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We are pleased with our performance in the quarter, highlighted by continued positive comparable store sales in North America and growth internationally,” Coach CEO Victor Luis said in a release. “We remained focused on elevating the perception of the Coach brand through compelling product, differentiated store environments and emotional marketing. At the same time, we implemented the strategic actions necessary to reposition the brand and streamline our distribution in the promotional North American department store channel.”

Luis noted that despite the deliberate pullback, the company was able to pull off growth across key financials, including sales, gross profit, operating income as well as double-digit earnings growth.

For its part, Stuart Weitzman contributed $88 million in sales to the quarter compared to $87 million during the same period of the prior year. Luis said the company continues to have bullish goals for the brand, which it purchased in 2015, including double-digit sales growth throughout the current fiscal year.

At Stuart Weitzman, we’re making the key investments in management and creative talent, as well as infrastructure to support long-term, multicategory growth,” Luis said of the brand. “We’re driving global awareness and brand relevance, gaining traction with the millennial consumer.”

Net sales for the Coach brand totaled $950 million for the first fiscal quarter, an increase of 1 percent year-over-year on a reported basis and a decrease of 1 percent on a constant currency basis.

The company maintained its full-year guidance.

As of 11:15 a.m. ET today, Coach’s shares were up nearly 5 percent, to $37.62.