Coach (COH) Tops Q4 EPS by 1c

Coach (NYSE: COH) reported Q4 EPS of $0.31, $0.01 better than the analyst estimate of $0.30. Revenue for the quarter came in at $1 billion versus the consensus estimate of $973.69 million.

Victor Luis, Chief Executive Officer of Coach, Inc., said, “We are pleased with our fourth quarter and full year progress on the comprehensive plan we laid out a year ago to reinvigorate our brand and business. Our execution of these strategic initiatives and resulting performance has been consistent with our expectations and underscores our confidence in the path we’ve chosen. As we moved through Fiscal 2015, we drove sequential improvement in our North America bricks and mortar business while dramatically reducing the number of promotional impressions in the marketplace against a backdrop of heightened promotional activity. In addition, our international businesses posted moderate growth on a constant currency basis, highlighted by a double-digit increase in Europe and strong growth in China, driven entirely by the Mainland, as sales approached $600 million.”

“Importantly, our brand transformation gained momentum across our three key brand pillars: product, stores and marketing. We successfully introduced Stuart Vevers’s product across our multi-channel distribution, continued to open and renovate modern luxury concept stores globally, and had an overwhelmingly positive reception to our Men’s and Women’s fashion presentations. We also took an important step in becoming a multi-brand company, with the acquisition of Stuart Weitzman, which is expected to be an additional growth driver for the company.”

Fiscal Year 2016 Outlook:

The Company currently expects Coach stand-alone brand revenues for Fiscal 2016 to increase by low-single digits in constant currency on a 52-week basis consistent with prior guidance. Based on current exchange rates, foreign currency will have an approximate 200 basis point negative impact on Fiscal 2016 revenue growth. Gross margin for the Coach brand is projected to be in the area of 70% on a constant currency basis, while negative foreign currency effects may impact gross margin by 80-100 basis points. SG&A expenses for the brand are anticipated to rise at a mid-single-digit rate in constant currency, driven primarily by a shift in project timing from FY15, while dollar growth is expected to be somewhat lower. Therefore, taken together Coach brand operating margin for Fiscal 2016 is currently estimated to be in the mid-to-high teens. Interest expense is expected to be in the area of $30-$35 million for the year while the full year Fiscal 2016 tax rate is projected at about 28%.

This guidance excludes expected transformation-related charges of around $50 million, as well as Stuart Weitzman acquisition charges of around $30 million (which primarily includes the impact of limited life purchase accounting and contingent payments) over the course of 2016. In addition, the company is forecasting Stuart Weitzman brand sales in the area of $335 million on a dollar basis for fiscal 2016, driving Coach, Inc. total revenue growth to high-single digits and adding about $0.09 to earnings per diluted share, excluding charges associated with financing, short-term purchase accounting adjustments and contingent payments, and integration costs. The company also notes that fiscal 2016 will include a 53rd week, which is expected to contribute approximately $75-$80 million in incremental revenue and $0.06 in earnings per diluted share to Coach, Inc.

For earnings history and earnings-related data on Coach (COH) click here.

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