Coach (NYSE: COH) reported Q2 EPS of $0.68, $0.01 better than the analyst estimate of $0.67. Revenue for the quarter came in at $1.27 billion versus the consensus estimate of $1.28 billion.

Fiscal Year 2016 Outlook:

The Company is maintaining its Fiscal 2016 constant currency revenue growth and operating margin guidance for the Coach brand, while raising its consolidated operating income outlook based on second quarter results.

Coach brand revenues for Fiscal 2016 are still expected to increase by low-single digits in constant currency on a 52-week basis. However, based on current exchange rates, foreign currency is now expected to negatively impact overall Fiscal 2016 revenue growth by 225-250 basis points. Coach brand operating margin for Fiscal 2016 is still estimated to be in the mid-to-high teens with some shift between the gross margin and expense ratio from previous annual guidance. To this end, gross margin for the Coach brand is projected to be in the range of last year’s margin of about 69½% on a constant currency basis, while negative foreign currency effects are now projected to impact gross margin by 90-100 basis points. SG&A expenses for the brand are now anticipated to rise at a low-single-digit rate in constant currency, while growth is expected to be roughly flat in dollars. 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 contingent payments, integration-related activities and limited life purchase accounting) over the course of 2016.

In addition, based on Stuart Weitzman’s sales and margin outperformance during the holiday quarter, the company is now forecasting revenue for the brand to be in the area of $340 million on a reported dollar basis for fiscal 2016, driving Coach, Inc. total revenue growth to high-single digits on a constant currency basis and adding about $0.12 to earnings per diluted share, excluding charges associated with financing, short-term purchase accounting adjustments and contingent payments, and integration costs. Overall, the Stuart Weitzman business is now projected to negatively impact consolidated gross margin and operating margin by about 70 basis points and approximately 20 basis points, respectively – an improvement from previous guidance. Therefore, taken together with its projection for the Coach brand, the Company is raising its operating income outlook for Coach, Inc. for Fiscal 2016.

The company also notes that fiscal 2016 will include a 53rd week in its fourth quarter, which is expected to contribute approximately $75-$80 million in incremental revenue and $0.06 in earnings per diluted share to Coach, Inc.

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