Coach: China Sales Offset Falling North America Sales

coachNew York—After four quarters of disappointing sales, Coach Inc. today managed to beat estimates in its fourth quarter earnings report, helped by strong demand in international markets, especially China.

For the quarter ended June 28, Coach’s net income fell 66% but excluding items, it earned 59 cents a share. That was better than the 53 cents share analysts expected.

Net sales fell 7% to $1.14 billion, dragged down by the weak North American business, but again the figure beat analysts’ estimate for $1.09 billion in sales.

Coach’s shares were up 5% just below $36 in early trading today as the company assuaged Coach’s shares rose nearly 5% after the company also said it was “strongly committed” to paying a dividend, Top of Form

North American Sales Fall 16%

The company is also sprucing up its in-store presentations by having more open, accessible and prominently branded displays, CEO Victor Luis said on a conference call on Tuesday.

Even better, international sales rose 7% with China sales rising 20%. The company expects sales in China to rise 10% in the year ending June 2015 as it opens more stores to expand in tier 3 and tier 4 cities.

Coach said it expects China sales to top $600 million in fiscal 2015, higher than the $545 million a year earlier.

The growth in Asia offset another weak report in its North American market, where Coach expects sales to fall in the low double digits.

Coach’s sales in North America fell 16% while comp store sales decreased for the fifth straight time. In June Coach outlined plans to shutter about 70 stores and reduce discounted online sales.

“The fourth quarter capped a challenging year for the company, most notably in the North America women’s bag and accessory business,” said Luis. “However, it was also a year of many accomplishments for Coach, including the successful integration of our retail businesses in Europe, surpassing $500 million in sales in China, and driving Men’s to about $700 million in sales globally. Most importantly, we laid the groundwork for our brand transformation. A crucial milestone was the arrival of Executive Creative Director Stuart Vevers last September, who has already had a significant impact on the creative direction of the brand. This was highlighted by our first New York Fashion Week presentation in February and the editorial praise his inaugural collection received globally. We also developed our new retail concept, inspired by our New York City heritage, using an iconic materials palette that is distinctively Coach.”

 

 

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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com