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Coach Posts First Sales Increase in 10 Quarters

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Coach Inc. is reaping the benefits from the popularity of its recent purchase, Stuart Weitzman, posting its first sales increase in 10 quarters. The company’s second quarter net sales totaled $1.27 billion, a 4.5% increase from the same period of the prior year, and just short of analysts’ expectations of $1.28 billion.

Net sales for the Stuart Weitzman brand totaled $94 million. Victor Luis, Chief Executive Officer of Coach, Inc., said Stuart Weitzman boots in particular sold well 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. Importantly, we are effectively integrating Stuart Weitzman to Coach, Inc. while continuing to successfully execute the Coach brand transformation.”

Coach’s multi-year transformation to reinstate its place in the luxury market, led by Luis, cost the company $14 million in the quarter. The charges consisted primarily of organizational efficiency costs and accelerated depreciation for stores renovations. In addition, the company recorded costs of approximately $10 million associated with the acquisition of Stuart Weitzman.

Coach still has its work cut out in the U.S. Total North America Coach brand sales decreased 7% for the quarter to $731 million from $785 million last year, however its international sales rose 4% to $437 million. Sales in China and Japan increased 2%, respectively. Europe remained strong, growing at a double-digit pace in both total and comparable store sales.

Based on Stuart Weitzman’s sales and margin outperformance during the holiday quarter, Coach is now forecasting revenue for the brand to be in the area of $340 million on a reported dollar basis for fiscal 2016, driving Coach, Inc. total revenue growth to high-single digits on a constant currency basis and adding about $0.12 to earnings per diluted share.

Luis stated, “We remain focused on creating desire for our brands and building emotional connections with our customers globally, at every touch point. This will be demonstrated through our innovative product offering and runway shows, our bold marketing campaigns and our elevated in-store experience. As we move into the Coach brand’s 75th anniversary year in 2016, our initiatives will celebrate our authentic heritage of craftsmanship, amplifying our unique brand proposition.”

He added, “And, as our momentum builds, we are targeting a return to growth for the Coach brand with continued improvement in comparable store sales, while Stuart Weitzman also drives top and bottom line results. We have a clear vision, a well-articulated strategy and a proven track record of execution. We remain confident that we can drive sustainable growth and best-in-class profitability for Coach, Inc., over the long term.”

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