Source: Company reports

3Q16

Coach’s third-quarter 2015 revenue came in at $1.03 billion, beating the consensus estimate, as the company’s saw some improvements from its transformation plan it put in place two years ago. The revenue result was in line with management’s expectation. The North America division sales from Coach brand were $499 million, up 1.0 % year over year and 2% on a constant currency basis for the quarter, beating analysts’ estimate of $481 million. Comparable sales were flat while e-commerce contributed to the sales growth. Department stores sales were down mid-single digits as expected. The international Coach brand sales posted a solid 5% organic growth, or 7% on a constant currency basis. Asia and Europe were the two major growth areas. The strong sales increase from mainland China was partially offset by the decline in Hong Kong and Macau, resulting in a 2% overall increase in China. Europe grew at double digit pace, driven by both comp sales and distribution increases. The Stuart Weitzman brand reported total sales of $79 for the quarter. The operating income from this brand was $7million, which represents an operating margin of 9.3% on a non-GAAP basis and $5 million or 5.9% as reported.

Guidance

Looking into 2016, the company maintains the same revenue guidance of high-single digits. The Coach brand expects revenues growth to be low-single digits for the year, partly driven by positive comps from its North America division for the fourth quarter. Foreign currency is estimated to negatively impact the brand’s top line by 225-250 basis points. Start Weitzman is expected to add $340 million to the company’s total revenue for the year and $0.12 to EPS. In addition to financial guidance, the company also announced a series of cost-saving initiatives, including staffing level reduction at the global level, replacing technology platforms and upgrading its international supply chain. These initiatives are expected to bring the company’s operating margin to about 20% for the Coach brand by fiscal year 2017.