Coach, Inc. ( COH ) posted
better-than-expected third-quarter fiscal 2013 results. The
quarterly earnings of 84 cents a share beat the Zacks Consensus
Estimate of 81 cents, and surged from 77 cents earned in the
prior-year quarter, as demand in North America increased.
The news was welcomed by the market, as the shares of this
designer and marketer of fine accessories and gifts soared 12.9% or
$6.51 to $57.10 during pre-market trading hours. Coach's sustained
focus on store sales productivity, online sales initiatives,
merchandising, marketing and strategic pricing have helped it
remain afloat in a difficult consumer environment.
The New York-based Coach said that net sales for the quarter
came in at $1,187.6 million, up 7% from the year-ago quarter, and
came ahead of the Zacks Consensus Estimate of $1,202 million. On a
constant currency basis, sales increased 10%.
Behind the Headline
Total North American sales grew 7% to $792 billion.
Direct-to-consumer sales increased 8%, while comparable-store sales
inched up 1%. At point-of-sale (POS), North American department
stores sales remained marginally above compared with prior-year
quarter, whereas shipments into department stores also increased
International sales rose 6% year-over-year to $382 million.
China business sustained its strong performance as sales soared
about 40% with a double-digit rate increase in comparable-store
sales. International wholesale shipments fell marginally, whereas
sales trends across POS remain sturdy. Sales in Japan remained
flat, on a constant currency basis, whereas in dollar terms, sales
tumbled 14% 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. Management expects to attain more than $600 million in
sales worldwide from its Men's business and approximately $425
million in sales in China in fiscal 2013.
Management hinted that they have entered into an agreement to
buy their partner's 50% stake in their operations in the United
Kingdom and Europe. The transaction is expected to conclude in
Gross profit jumped 8% to $880 million spurred by top-line
growth, whereas gross profit margin expanded 35 basis points to
74.1%. Operating income rose 3% to $348 million but operating
margin contracted 110 basis points to 29.3%.
During the quarter, Coach opened 2 Men's factory stores, 1
retail store and shuttered 5 locations, thereby taking the total to
191 factory stores and 352 retail stores in North America. In
Japan, the company closed 2 outlets bringing the total number of
locations at 191.
In China, an addition of 1 new location during the quarter took
the total to 118. As a result of the acquisitions of retail
businesses in Singapore, Taiwan, Malaysia and Korea, the company
now operates 7, 27, 10 and 49 locations, respectively.
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 growth.
The company ended the quarter with cash, cash equivalents and
short-term investments of $928.5 million and total long-term debt
of $22.6 million with shareholders' equity of $2,244 million.
Coach's Board of Directors raised the annual dividend by 15
cents to $1.35 per share, which is scheduled to be paid to
shareholders in Jul 2013.
Other Stocks Worth Considering
Currently, Coach holds a Zacks Rank #4 (Sell). Other stocks
worth considering in the textile, apparel, footwear industry are
G-III Apparel Group, Ltd. ( GIII ), Ralph
Lauren Corporation ( RL ) and
Hanesbrands Inc. ( HBI ) all holding a
Zacks Rank #2 (Buy). We expect these stocks to continue with their
upbeat performances.COACH INC (COH): Free Stock Analysis ReportG-III APPAREL (GIII): Free Stock Analysis
ReportHANESBRANDS INC (HBI): Free Stock Analysis
ReportRALPH LAUREN CP (RL): Free Stock Analysis
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