Coach Beats Estimates but Stocks Drop on Downbeat Forecast

In What's New, Industry News by Accessories Staff

Coach on the FW17 runway. FirstView

While Coach did beat analysts expectations in its Q4 earnings, a downbeat forecast didn’t help, sparking a stock selloff.

Shares of Coach slipped 10% in pre-market trading as Wall Street may have been looking for more optimism with guidance now that newly acquired Kate Spade & Co. (KATE) will be in the mix, according to The Street. Coach recently closed on a $2.4 billion acquisition of Kate Spade, a reach toward millennials.

Coach has been reining in wholesale distribution in efforts to take back the brand and prevent discounting.

Coach is projecting full-year fiscal 2018 earnings per share between $2.35 and $2.40, below Thomson Reuters expectations of $2.49 per share. The company also projected softer-than-expected fiscal year 2018 revenue of $5.8 billion to $5.9 billion, below estimates of $6 billion in revenue.

Below, a look at what was expected against what actually came in:

  • Revenue rose 6% to $1.13 billion versus $1.51 billion expected, according to Thomson Reuters.
  • North American comparable store sales: up 4% versus 3.6% expected, according to StreetAccount.
  • EPS: 50 cents versus 49 cents expected, according to Thomson Reuters.

Net income rose to $152 million, or 53 cents per share, from $82 million, or 29 cents per share, in the comparable quarter last year. Excluding items, Coach earned 50 cents per share, outpacing analysts’ expectations of 49 cents per share, according to Thomson Reuters.

Victor Luis, Chief Executive Officer of Coach, Inc., commented:

“We were also very pleased with the overall contribution of the Stuart Weitzman brand as we invested in the brand, both in stores and most significantly in people, bringing in the key leadership and design talent to drive performance in both growing the global footwear category and in their nascent accessories business.”

“We also took a major step in our corporate transformation with the acquisition of Kate Spade & Company, which closed in July, becoming the first New York-based house of modern luxury lifestyle brands. Kate Spade brings a new, unique brand attitude and an additional consumer segment to the Coach, Inc. portfolio and we expect that this acquisition will enhance our position in the attractive and growing $80 billion global premium handbag and accessories, footwear and outerwear market.”

The fashion company was rumored to be pursuing Jimmy Choo before rival Michael Kors signed a deal to buy the high-end shoemaker for $1.2 billion.

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