Coach Stock Climbs On Q2 Revenue Beat, Stuart Weitzman ‘Outperforms’

Shares of Coach Inc. are surging Tuesday morning — up more than 10 percent at press time — on a better-than-expected second-quarter performance.

The New York-based luxury-goods maker said its revenues rose 7 percent over the prior year, or 4 percent on a reported basis, to 1.27 billion, a beat over market watchers’ estimates for sales of $1.26 billion.

However, the brand’s net earnings, at 61 cents per diluted share, or $170.1 million, fell below Wall Street’s forecast for diluted EPS of 66 cents (GAAP). Luxury shoemaker Stuart Weitzman, acquired by Coach last year, contributed $12 million, or 4 cents per share, to those earnings (GAAP).

“We are very pleased with our second-quarter performance, which was consistent with our expectations and reflected the most significant progress to date on our transformation plan despite the difficult retail environment globally,” Coach CEO Victor Luis said in a release. “We drove further sequential improvement in our North America bricks-and-mortar business — led, as expected, by our retail stores, while our outlet-store channel also strengthened against a backdrop of lower tourist traffic and a highly promotional environment.”

Coach’s international businesses, Luis added, posted solid growth on a constant-currency basis, highlighted by double-digit increases in Europe and Mainland China, as well as revenue gains in Japan.

Luis predicts that the company’s efforts will help it return to top-line growth this fiscal year and positive North American comps by Coach’s fourth quarter.

“We were also excited about Stuart Weitzman’s results during the quarter, which exceeded expectations. Boots in particular sold well, notably in domestic retail stores, and in spite of the unseasonably warm weather,” Luis said. “This performance clearly reflected the brand’s strong development of fashionable, trend-right product and its growing relevance with an increasing number of consumers globally. “

As had been expected, comps in North America declined 4 percent in the quarter.

“At [point-of-sale], sales in North America department stores declined at a mid-single-digit rate versus last year, as expected, while net sales into department stores declined to a similar degree,” Cowen & Co. analyst Oliver Chen pointed out in a note Tuesday morning, suggesting the brand’s comp declines were driven by overall retail declines.

Analysts were generally upbeat on Coach’s results and optimistic on the business. On the heels of the company’s earnings release, UBS Investment Bank analyst Michael Binetti reiterated a buy rating on the stock, and Chen reiterated an outperform rating.

Net Income: Net income declined 7.3 percent year-over-year, to $170.1 million, from $183.5 million in the comparable quarter.

EPS: Diluted EPS declined, by 6 cents year-over-year, to 61 cents, from 67 cents in the year-ago quarter.

Net Revenue: Revenues rose 7 percent over the prior year, or 4 percent on a reported basis, to 1.27 billion.

Hit, Miss or Beat: Analysts polled by Yahoo Finance had predicted revenue of $1.26 billion and EPS of 66 cents.

Looking Ahead: Coach maintained its consolidated full-year 2016 sales guidance but raised its operating-income outlook.

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