Lower Taxes Help Drive Coach (COH) Q2 Beat; Stifel Affirms at 'Hold'
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Stifel affirms Coach (NYSE: COH) at Hold following Q2 results and outlook offered earlier Tuesday.
Analyst Richard Jaffe offered the following key points today:
- The beat vs. our estimate was driven by a lower-than-expected tax rate ($0.04/share benefit) and lower interest expense ($0.01/share benefit). We believe the stock will likely trade lower today, driven by the tax rate driven beat and management’s 2017 EPS guidance, which is below consensus.
- The continuation of positive comps remain believable for the NA business in 2017, in our view. Europe, Japan and China remain resilient, despite well-known weakness in Hong Kong and Macau.
- Management initiated its COH FY17 OM guidance of 18.5%-19%. The guidance includes the negative impact from Stuart Weitzman and management’s strategic decision to elevate the Coach brand’s positioning in the North American wholesale channel, including the closure of about 25% of doors and a reduction in markdown allowances. Excluding this impact, Coach brand operating margin would be around 20%, in-line with prior guidance.
- NA comp of 2.0% was in line with our 2.0% consensus matching model. E-commerce positively impacted comps by 100 bps. Total sales, including the benefit from the extra week, increased 15% y/y, relatively in line with our model and the Street.
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