Coach is holding a conference call to report its fourth quarter and financial year 2016 earnings on August 9, 2016.
Factors To Consider:
1) Collaboration With Disney
- Coach teamed up with Disney for range of handbags, t-shirts, and sneakers, featuring the world's most iconic mouse.
- It debuted in New York and Paris on June 10th, followed by its other stores on June 17th.
- Since the launch, several items have sold out online, including all four colors of the $395 kisslock handbags, designed in the shape of Mickey's ears, and $1,500 leather dolls and bean bags.
- Such limited editions help prevent discounting in order to move inventory, which would result in lowering the brand value.
2) Reduced Spending On Handbags
- Coach is heavily reliant on its handbags and handbag-related products, which constitute 80% of its sales.
- If this category slows down, it would be hard for the company to turnaround its business.
- According to a recent survey, 24% of consumers expect to spend less on handbags in 2016, higher than the percent expecting to spend less on other luxury items.
- Coach also realizes 60% of its sales from outlets, which makes it hard to wean the company off discounting.
Highlights Of The Previous Quarter:
1) Turnaround of Coach's North American Business
- Same-store sales at the retail stores were unchanged, after a number of quarters of negative comps, representing the fourth consecutive quarter of improvement.
- While store and mall traffic were soft, due to increased internet sales, more was spent per customer versus a year prior.
- Positive comps were seen in the renovated luxury concept retail outlets.
- Low single-digit growth in the North American premium women's handbag and accessories market.
- Higher premium handbag purchases, as compared to six months ago.
- The above $400 price bracket rose in penetration, and forms ~40% of handbag sales, up from ~30% last year.
- Handbag AUR (Average Unit Retail) has risen to over $300 in the quarter, for the first time since FY 2009.
2) Chinese Market And Chinese Tourists Driving International Sales
- Greater China third quarter sales increased 2%.
- This was driven by double-digit growth and positive comps on the Mainland, offset by weakened markets in Hong Kong and Macau due to a slowdown in inbound tourist traffic from the Mainland.
- Annual sales forecast of $600M, reflecting continued softness in Hong Kong and Macau.
- Decline in Chinese tourists to North America and Europe, notably France, affected performance there.
- Growth in Chinese tourist spending in Japan, Korea, and Southeast Asia resulted in high growth.
- Japan sales grew by 7% on a constant currency basis, benefiting from increased Chinese tourist traffic and a positive response to the new modern luxury stores.
Have more questions on Coach? See the links below:
- What Will Be Coach's Revenue And EBITDA Breakdown In 2016?
- How Will Coach Perform In 2016?
- What Will Be The Impact of Coach's Collaboration With Disney?
- How Has Coach's Revenue Per Square Foot Changed Over The Years?
- What Percentage Of Coach's Stock Price Can Be Attributed To Growth?
- Why Are We Bullish On Coach?
- What Has Resulted In A Decline In North American Net Sales And A Rise in International Sales For Coach So Far In FY 2016?
- Coach's Strong Presence In China To Help The Company In The Future
- How Did the Different Segments Of Coach Perform In Q3 2016?
- How Has The Transformation Plan Affected Coach's North American Retail Store Count?
- Coach Q3 2016 Earnings And Revenue Beats Expectations
- What To Expect From Coach In Q3 FY 2016?
- Is Coach's Transformation Plan Working?
- What Is The Breakdown Of The Charges Associated With Coach's Transformation Plan?
- Coach: Year 2015 In Review
- Is The Men's Segment Becoming Big Business For Coach?
- How Will Coach's Revenue And EBITDA Change In The Next 3 Years?
- What Is Coach's Fundamental Value Based On Expected 2016 Results?
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email email@example.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Coach .
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