) posted fourth-quarter fiscal 2013 earnings of 89 cents a share
that came in line with the Zacks Consensus Estimate, and rose
3.5% from 86 cents earned in the prior-year quarter.
On a reported basis, including one-time items, quarterly
earnings of this designer and marketer of fine accessories and
gifts came in at 78 cents a share down from 86 cents earned in
the year-ago quarter. Shares fell 6.1% or $3.50 to $54.35 during
pre-market trading hours.
The New York-based Coach said that net sales for the quarter
came in at $1,222.7 million, up 6% from the year-ago quarter,
buoyed by sturdy performance in international markets, such as
China. However, total revenue fell short of the Zacks Consensus
Estimate of $1,236 million. On a constant currency basis, sales
Behind the Headline
Total North American sales grew 6% to $825 million.
Direct-to-consumer sales increased 5%, while comparable-store
sales dropped 1.7%. At POS (point of sale), North American
department stores sales remained marginally above compared with
prior-year quarter, whereas shipments into department stores also
Coach also announced that the President of North American
Segment, Mike Tucci and Jerry Stritzke, President and Chief
Operating Officer have decided to leave the company, effective
International sales rose 7% to $386 million. China business
sustained its strong performance as sales soared about 35% with a
double-digit rate increase in comparable-store sales.
International wholesale shipments grew marginally, whereas sales
trends across POS also increased. Sales in Japan jumped 4%, on a
constant currency basis, whereas in dollar terms, sales tumbled
15% from the year-ago quarter due to softer yen.
The rise in total sales was a positive indication for the
luxury-goods market, battered by the recent economic upheaval.
Coach's sustained focus on store sales productivity,
merchandising, and marketing and strategic pricing have helped it
remain afloat in a difficult consumer environment.
Going forward, the company remains optimistic about its unisex
Legacy lifestyle collection, dedicated Men's stores and
international growth opportunities to counter the soft consumer
scenario. Coach attained more than $600 million in sales from its
Men's business and approximately $430 million in sales from China
in fiscal 2013, reflecting an increase of about 50% and 40%,
Adjusted gross profit jumped 6% to $892.2 million, whereas
gross profit margin expanded 40 basis points to 73%. Adjusted
operating income remained almost flat at $371 million but
operating margin contracted 180 basis points to 30.3%.
During the quarter, Coach, the maker of handbags, wallets,
shoes and other accessories, opened 2 factory stores (including a
Men's store), 3 retail stores and shuttered 4 retail locations,
thereby taking the total to 193 factory stores and 351 retail
stores in North America. In Japan, the company opened 7 outlets
bringing the total number of locations at 191.
In China, addition of 8 new locations during the quarter took
the total to 126. As a result of the acquisitions of retail
businesses in Singapore, Taiwan, Malaysia and Korea, the company
now operates 7, 27, 10 and 48 locations, respectively.
Coach also acquired the remainder stake in the company's
European joint venture, and gained direct control of 18 locations
in the U.K., Spain, Ireland, Portugal, France and Germany.
Other Financial Details
Coach maintains a healthy balance sheet with a significant
cash balance and a negligible debt load. The company also has
been proactively managing its cash flows by making prudent
capital investments and enhancing shareholders' return. The
company's strong liquidity, positions it to drive future
The company ended the quarter with cash, cash equivalents and
short-term investments of $1,134.9 million and total long-term
debt of $985,000 with shareholders' equity of $2,409.2
During fiscal year 2013, the company bought back more than 7
million shares at a cost of $56.61 per share, aggregating $400
million. The company still has approximately $1.4 billion
remaining at its disposal under its current share buyback
Other Stocks Worth Considering
Currently, Coach holds Zacks Rank #4 (Sell). Other stocks
worth considering in the retail sector are
G-III Apparel Group, Ltd.
Michael Kors Holdings Ltd.
) all holding a Zacks Rank #2 (Buy). We expect these stocks to
continue with their upbeat performances.
COACH INC (COH): Free Stock Analysis Report
G-III APPAREL (GIII): Free Stock Analysis
HANESBRANDS INC (HBI): Free Stock Analysis
MICHAEL KORS (KORS): Free Stock Analysis
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