) posted third-quarter fiscal 2014 earnings of 68 cents a share
that beat the Zacks Consensus Estimate of 63 cents but tumbled
19% from 84 cents delivered in the prior-year quarter.
New York-based Coach said that net sales for the quarter came
in at $1,099.6 million, down about 7% from the year-ago quarter
and also fell short of the Zacks Consensus Estimate of $1,134
million due to softness in the North American market. On a
constant currency basis, sales decreased 5%.
Management stated that sluggishness in North American women's
bag and accessories business offset sturdy growth witnessed in
men's, footwear and strong results across Asian and European
markets. Adverse weather conditions and shift in Easter holiday
also impacted the results.
Investors do not appear impressed with Coach's results, thus
shares of this designer and marketer of fine accessories and
gifts fell 4.5% or $2.27 to $48.15 during
Behind the Headline
Total North American sales fell 18% to $648 million.
Direct-to-consumer sales decreased 18%, while comparable-store
sales dropped 21%. At POS, North American department stores sales
remained marginally below the prior-year quarter, whereas
shipments into department stores also dropped.
International sales rose 14% to $441 million over the year-ago
quarter. On a constant currency basis, International sales jumped
approximately 20%. China business sustained its strong
performance as sales surged over 25% with a double-digit rate
increase in comparable-store sales. In China, the company remains
on track to generate sales more than $540 million for the
International wholesale shipments increased considerably,
whereas sales trends across POS remained strong. Sales in Japan
grew 10% on a constant currency basis, whereas in dollar terms,
sales tumbled 2% from the year-ago quarter due to softer yen.
Gross profit fell 11.2% to $781.3 million, whereas gross
profit margin contracted 300 basis points to 71.1%. Operating
income came in at $262.7 million, down 24.6% from the prior-year
quarter, however, operating margin expanded 240 basis points to
During the quarter, Coach, a maker of handbags, wallets, shoes
and other accessories, closed 13 stores in North America, thereby
taking the count to 543. In Japan, total number of locations
increased to 199 due to the opening of 3 stores.
In China, addition of 5 new locations during the quarter took
the total to 147. Across Asia (Other), the company closed 2
locations taking the total to 96. Coach also acquired the
remainder stake in the company's European joint venture, and
opened 2 stores resulting in a total count of 26 stores.
Other Financial Details
Coach maintains a healthy balance sheet with a significant
cash balance. The company also has been proactively managing its
cash flows by making prudent capital investments and enhancing
The company ended the quarter with cash, cash equivalents and
short-term investments of $774.9 million and current debt of
$210.5 with shareholders' equity of $2,389.3 million.
During the quarter, the company bought back 3.6 million shares
at a cost of $47.99 per share, aggregating $175 million. The
company still has approximately $835 million remaining at its
disposal under its current share buyback program.
Other Stocks Worth Considering
Currently, Coach holds a Zacks Rank #4 (Sell). Other stocks
worth considering in the retail sector are
J. C. Penney Company, Inc.
), all sporting a Zacks Rank #2 (Buy).
COACH INC (COH): Free Stock Analysis Report
HANESBRANDS INC (HBI): Free Stock Analysis
PENNEY (JC) INC (JCP): Free Stock Analysis
V F CORP (VFC): Free Stock Analysis Report
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