Coach Maintains Full Year 2016 Guidance
First quarter net sales increased 3% over prior year in constant currency; down 1% on a reported basis.
Victor Luis, Chief Executive Officer ofCoach, Inc., said, “We are pleased with our first quarter performance, which was consistent with our plan and reflected continued progress on our transformation journey. We drove further sequential improvement in our North America bricks and mortar business – led, as expected, by our retail stores – with this momentum continuing into the second quarter. Our international businesses posted moderate growth on a constant currency basis, highlighted by double-digit increases in Europeand Mainland China, as well as sales gains in Japan. Overall, our results underscore our confidence that the cumulative impact of our actions will result in a return to top line growth in FY16 and positive North American comps by the end of the year.”
“Importantly, we continued to successfully execute our brand transformation strategies across our three key brand pillars: product, stores and marketing in the quarter. Stuart Vevers’s new product – notably the Ace and Nomad handbags in retail and Blake in outlet – have been very well received by customers across geographies. Our Modern Luxury stores globally and across channels are performing well, and we’re especially pleased with the ongoing positive comps we’re generating in the North American retail stores which have been renovated, as we anniversary the delivery of Stuart’s first collection. And we hosted our first true runway show during New York Fashion Week, receiving great editorial reviews, while kicking off our 75thanniversary year celebrations.” said Victor Luis.
Overview of First Quarter 2016 Consolidated, Coach, Inc. Results:
- Net salestotaled $1.03 billion for the first fiscal quarter, compared with $1.04 billion reported in the same period of the prior year, a decrease of 1%. On a constant currency basis, total sales increased 3% for the period.
- Gross profittotaled $697 million versus $719 million a year ago on a Non-GAAP basis, while gross margin was 67.7% versus 69.3%. On a reported basis, Coach, Inc. gross profit was also $697 million versus $715 million a year ago, with a gross margin of 67.6% versus 68.9%.
- SG&A expensesof $532 million compared to $503 million in the prior year on a non-GAAP basis, an increase of 6%. As a percentage of net sales, SG&A totaled 51.7% on a non-GAAP basis, compared to 48.4% in the year-ago quarter. On a reported basis, SG&A expenses were $555 million or 53.9% of sales as compared to $536 million or 51.6% on a reported basis in the year ago period.
- Operating incomefor the quarter on a non-GAAP basis totaled $165 million compared to $217 million in the prior year, while operating margin was 16.0% versus 20.9%. On a reported basis, operating income was $141 million compared to $180 million in the prior year, while operating margin was 13.7% versus 17.3%.
- Net interest expensewas $7 million in the quarter as compared to net interest income of $1 million in the year ago period.
- Net incomefor the quarter on a Non-GAAP basis totaled $113 million, with earnings per diluted share of $0.41. This included a contribution of $11 million or $0.04 per share from Stuart Weitzman. This compared to non-GAAP net income in the first quarter of FY15 of $146 million with earnings per diluted share of $0.53. On a GAAP basis, net income for the quarter was $96 million with earnings per diluted share of $0.35 including a contribution of $5 million or $0.02 per share from Stuart Weitzman. This compared to prior year GAAP net income of $119 million or $0.43 earnings per diluted share.
Stuart Weitzman First Quarter of 2016 Results:
- Net salesfor the Stuart Weitzman brand totaled $87.5 million for the first fiscal quarter.
- Gross profitfor the Stuart Weitzman brand totaled $50.6 million on a non-GAAP basis, resulting in a gross margin of 57.8% and$49.7 million with a margin of 56.8%, as reported.
- SG&A expenseswere $35.5 million for the Stuart Weitzman brand or 40.6% of sales on a non-GAAP basis and $42.0 millionrepresenting 48.0% of sales as reported.
- Operating incomefor the Stuart Weitzman brandwas $15.1 million representing an operating margin of 17.2% on a non-GAAP basis, and $7.7 million or 8.8% as reported.
(Featured Image:Coach bag and Chloe Grace Moretz)