Coach (COH) reported earnings on Tue 1 Nov 16 (b/o)

** charts after earnings **

 

Coach reports EPS in-line, misses on revs; reaffirms FY17:

• Reports Q1 (Sep) earnings of $0.45 per share, in-line with the Capital IQ Consensus of $0.45; revenues rose 0.7% year/year to $1.04 bln vs the $1.07 bln Capital IQ Consensus. Net sales for the Coach brand totaled $950 million for the first fiscal quarter, an increase of 1% on a reported basis and a decrease of 1% on a constant currency basis. As expected, the strategic actions in the North America wholesale channel impacted sales by about 150 basis points.
  • Total North American Coach brand sales decreased 3% on both a reported and constant currency basis to $545 million.
  • International Coach brand sales rose 7% to $395 million on a reported basis from $369 million last year and 3% on a constant currency basis. Greater China sales were approximately even with prior year in dollars and increased 5% on a constant currency basis driven by double-digit growth and positive comparable store sales on the Mainland offset by continued weakness in Hong Kong and Macau. In Japan, sales rose 11% in dollars and decreased 7% in constant currency impacted by a decline in Chinese tourist spend, lapping last year's dramatic increase.
  • Sales for the remaining directly-operated businesses in Asia rose low-single digits in dollars and constant currency, while Europe remained strong, growing at a double-digit pace.
• Co is maintaining its fiscal 2017 outlook as outlined in August.
  • Co continues to expect revenues for fiscal 2017 to increase by low-to-mid single digits, including an expected benefit from foreign currency of ~100-150 basis points based on current exchange rates. In addition, the Company is maintaining its operating margin forecast for Coach, Inc. of between 18.5-19.0% for fiscal 2017. This guidance incorporates the negative impact of both Stuart Weitzman and the strategic decision to elevate the Coach brand's positioning in the North American wholesale channel, including a reduction in promotional events and the closure of about 25% of doors. Interest expense is still expected to be in the area of $25 million for the year while the full year fiscal 2017 tax rate is projected at about 28%.
  • Taken together, the Company continues to project double-digit growth in both net income and earnings per diluted share for the year (consensus +9.1% to $2.16).