Coach Shares Tumble After Q4 Sales Fall Short

Coach Inc. shares are taking a beating today — as of 10:15 a.m. ET, the stock remained down more than 13 percent at $41.56 — after the company announced Q4 sales that fell short of forecasts.

Fourth-quarter sales for the New York-based owner of Coach, Stuart Weitzman and newly acquired Kate Spade declined nearly 2 percent to $1.13 billion, missing Wall Street’s bet for sales of $1.15 billion. (Excluding the additional week included in fiscal 2016 results, net sales increased 6 percent on a reported basis and 7 percent on a constant-currency basis.) Net sales for the Stuart Weitzman brand gained 5 percent year-over-year to $88 million.

Profits during the period rose 85 percent to $152 million, or 53 cents per diluted share. Adjusted profits, at $142 million, or 50 cents per diluted share, topped analysts’ expectations for profits of 49 cents per share.

Our strong fourth-quarter results — in which we achieved mid-single-digit North America comparable-store sales for the Coach brand and drove solid growth at Stuart Weitzman — capped an excellent FY17 performance for the company,” CEO Victor Luis said. “For the year, we posted a double-digit increase in net income as we continued to make progress on our brand and company transformation plan. We generated positive Coach brand North American comps in each quarter, while driving solid international Coach brand sales gains, notably in Europe and Mainland China.

For the full year, net sales remained flat at $4.49 billion. Excluding the additional week included in fiscal 2016 results, net sales increased 2 percent on both a reported and constant-currency basis. Net income totaled $591 million on a reported basis, with earnings per diluted share of $2.09, representing a gain of 28 percent over the previous year. Adjusted net income was $609 million, or $2.15 per diluted share.

Looking ahead, the company expects revenues for fiscal 2018 to increase about 30 percent versus fiscal 2017, to $5.8 to $5.9 billion, with low-single-digit organic growth and the acquisition of Kate Spade adding over $1.2 billion in revenue.

Coach is projecting EPS in the range of $2.35 to $2.40, an increase of about 10 percent to 12 percent for the year, including low- to mid-single-digit accretion from the acquisition of Kate Spade.

Three years ago we laid out an ambitious plan to transform the Coach brand, with a goal of increasing relevancy and improving consumer perceptions,” Luis said. “We are extremely pleased with the progress we’ve made, having largely attained our strategic goals, in spite of the impact of the volatile retail and macroeconomic environment on our core category. Today, after the successful integration of Stuart Weitzman and the acquisition of Kate Spade, we are at an exciting and pivotal moment in our journey.”

He added, “In an unpredictable environment, we are evolving to drive our long-term success by reinventing ourselves, moving from a single-brand, specialty retailer to a true house of emotional, desirable brands built on our unique values.”

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