) posted fourth-quarter fiscal 2014 earnings of 59 cents a share
that came ahead of the Zacks Consensus Estimate of 54 cents on
higher international sales. Moreover, net sales of this New
York-based company, which came in at $1,136.2 million also
surpassed the Zacks Consensus Estimate of $1,099 million. The
better-than-expected results provided an impetus to the stock which
jumped roughly 3% during
Coach, Inc - Earnings Surprise |
However, what came as a drawback for this designer and marketer
of fine accessories and gifts was that both top and bottom lines
fell 7.1% and 33.7%, respectively, from the year-ago quarter. On a
constant currency basis, sales decreased 6%. Management held
sluggishness in North American women's bag and accessories business
responsible for the year-over-year decline. Moreover, increased
SG&A expenses also weighed upon the bottom-line
Including one-time items, Coach reported earnings of 27 cents a
share, sharply down from 78 cents delivered in the prior-year
Behind the Headline
Total North American sales fell 16% to $691 million.
Direct-to-consumer sales decreased 15%, while comparable-store
sales dropped 17%. At POS, North American department stores sales
were marginally above the prior-year quarter, whereas shipments
into department stores dropped.
International sales rose 7% to $414 million over the year-ago
quarter. On a constant currency basis, International sales jumped
approximately 9%. China business continued its strong performance
as sales surged 20% with a double-digit rate increase in
comparable-store sales. Sales in China surpassed $500 million in
the fiscal year.
International wholesale shipments fell, whereas sales across POS
rose. Sales in Japan fell 6% on a constant currency basis, whereas
in dollar terms, sales dropped 10% from the year-ago quarter due to
Adjusted gross profit fell 11.6% to $788.6 million, whereas
gross profit margin contracted 360 basis points to 69.4%. Adjusted
operating income came in at $231.3 million, down 37.6% from the
prior-year quarter, while operating margin shriveled 990 basis
points to 20.4%.
During the quarter, Coach closed 4 stores in North America,
thereby taking the count to 539. In Japan, total number of
locations decreased to 198 due to the closure of 1 store.
In China, the addition of 6 new locations during the quarter
took the total to 153. Across Asia (Other), the company opened 1
location taking the total to 97. Coach also acquired the remainder
stake in the company's European joint venture, and opened 1 store
resulting in a total count of 27 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 $868.6 million, current debt of $140.5
and shareholders' equity of $2,420.7 million.
During fiscal 2014, the company bought back 10.2 million shares
at $51.27 per share, aggregating $525 million. The company still
has approximately $835 million remaining at its disposal under its
current share buyback program.
The company also declared quarterly cash dividend of 33.75 cents
a share to be paid on Sep 29 to shareholders of record as of Sep
Currently, Coach holds a Zacks Rank #5 (Strong Sell).
Better-ranked stocks in the retail sector include Hanesbrands Inc.
) with a Zacks Rank #1 (Strong Buy), as well as Ralph Lauren
) and V.F. Corporation (
) with a Zacks Rank #2 (Buy).
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