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Coach Beats Street In Q3, Announces Job Cuts & Management Changes

Coach Inc. reported today third-quarter revenues that beat market watchers’ estimates but said it is implementing operational changes to further boost its performance.

The New York-based luxury brand said its reported net income for the quarter advanced 28 percent to $112.5 million, or 40 cents per diluted share, from $88.1 million, or 32 cents per diluted share in the year-ago period. Non-GAAP diluted earnings per share increased 23 percent, to 44 cents per share. Analysts had been expecting diluted EPS of 41 cents.

Revenues also gained 11 percent, to $1.03 billion, from of $929.3 million in the comparable quarter. Market watchers had predicted revenue of $1.02 billion.

Coach CEO Victor Luis said he was pleased with the company’s overall performance despite sluggish tourist spending as well as macroeconomic and promotional headwinds. International, the CEO pointed out, was a callout.

Both our retail and outlet stores in North America sequentially improved from the holiday quarter, and e-commerce was an overall contributor as well,” Luis said in a release. “Our international businesses posted strong growth on a constant currency basis, highlighted by double-digit increases in Mainland China and Europeas well as sales gains in Japan and Other Asia … We are on track to return to positive comps in North America in the fourth quarter and to achieve an inflection in our profitability.”

As the firm approaches its one-year anniversary of ownership of the Stuart Weitzman brand, Luis said the company also recently purchased the brand’s Canadian distributor — a sale that expected to close by the end of the fourth quarter.

Luis added that he was upbeat on Weitzman’s overall contributions to the business during the quarter.

We see significant potential for the brand longer term and are delighted with its integration, which speaks to our ability to operate as a multi-brand company,” Luis said.

The company also announced today a series of initiatives that it said is focused on boosting its organizational efficiency. Coach expects to incur pretax charges of about $65 million to $80 million, primarily related to job cuts at the corporate staffing level globally. Other contributors include technology infrastructure charges and international supply chain and office location optimization. Combined with other measures, the initiatives are expected to help the company reach its goal of about a 20 percent operating margin for the Coach brand in FY17.

Luis also announced a few upper management changes at the brand.

Andre Cohen is being promoted to president of North America and global marketing and Todd Kahn is being promoted to president, chief administrative officer and secretary. Gebhard Rainer, Coach’s president and COO, and David Duplantis, president of global marketing, digital and customer experience, will both exit the firm.

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