Coach saw its top and bottom lines coming ahead of the Zacks
Consensus Estimate, when it posted first-quarter fiscal 2015
results. The quarter also highlighted higher international sales.
However, what came as a drawback was that both sales and earnings
per share fell 9.7% and 31.2%, respectively, from the year-ago
quarter. Management held sluggishness in North American handbag
business responsible for the year-over-year decline. Coach now
expects sales to decline in low double-digit on a constant currency
basis in fiscal 2015 due to lower promotion and store closure. We
believe a mature domestic market and cautious consumer spending
environment also remain causes of concern. However, the company has
undertaken transformation initiatives revolving around, product,
stores and marketing to bring itself back on the growth trajectory.
Currently, we maintain our Neutral recommendation on the stock.
Founded in 1941 and headquartered in New York, Coach, Inc. (COH)
is the designer and marketer of fine accessories and gifts for
women and men in the United States and internationally. The Company
offers lifestyle products, which include handbags, women's and
men's accessories, footwear, jewelry, wearables, business cases,
sunwear, travel bags, fragrance and watches.
Beginning with the first quarter of fiscal 2013, Coach operates
under two business segments North American and International.
North American segment includes sales to customers via North
American company-owned stores, including the Internet, and sales to
North American wholesale customers and distributors. The segment
represented approximately 65% of fiscal 2014 net sales.
International segment includes sales via company-operated
outlets (including the Internet) and concession store-in-stores in
Japan, mainland China, Hong Kong, Macau, Singapore, Taiwan,
Malaysia, South Korea, the United Kingdom, France, Ireland, Spain,
Portugal, Germany and Italy, as well as sales to wholesale
customers and distributors in about 35 countries. The segment
represented approximately 34% of fiscal 2014 net sales.
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