Coach Shares Plunge as 2017 Forecast Fails to Inspire

coach-coh-logoLuxury handbag maker Coach Inc (NYSE:COH) on Tuesday before the bell released its latest earnings results. Fiscal Q4 performance was good, but the company’s forecast was lower than expected.

The New York-based company reported fiscal fourth quarter net income of $0.45 per share, beating analyst estimates of $0.41. Revenue rose 15% from last year to $1.16 billion, which was in-line with expectations.

Other notes from the call included:

  • North American sales rose 9% to $606 million.
  • North American direct sales gained 10%.
  • International sales rose 15% to $450 million.
  • Gross profit rose 10% to $737 million.
  • Full-year net sales rose 9% on a constant currency basis to $4.49 billion.

Looking ahead, COH forecast fiscal 2017 sales growth in the low-to-mid single digits, with an operating margin of $18.5% to 19%.

Coach CEO Victor Luis commented, “Our strong fourth quarter results – in which we achieved positive North America comparable store sales and drove increases across key financial metrics- capped a year where we returned the Coach brand to growth. At the same time, we elevated brand perception globally. I couldn’t be more pleased with our team’s execution of the transformation plan over the last two years, as we tracked to our goals in spite of the significant and unanticipated volatility in tourist spending flows, as well as macroeconomic and promotional headwinds. In the quarter, our North American direct business accelerated, while we continued to implement strategic actions to elevate our positioning and streamline our distribution in the department store channel. Our international businesses continued to grow, highlighted by double-digit increases in Mainland China and Europe, as well as sales gains in our directly operated businesses in Southeast Asia. Most importantly, we achieved the expected inflection in profitability, as we leveraged our expenses on the growth in the business.”

COH is in the middle of a multi-year turnaround plan. The brand, like many luxury goods makers, has struggled in recent years to grow sales in the face of increased competition and lower consumer spending on luxury items.

Coach shares fell $1.30 (-3.14%) to $40.15 in volatile premarket trading Tuesday. COH has risen 26% since the start of 2016, compared with a 7% rise in the benchmark S&P 500 index in the same period.


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