Coach Q4 Profit Falls 12%; to Sell Reed Krakoff Brand

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Coach's Madison Sadie Flap Satchel in Spectator Saffiano Leather.

Coach’s Madison Sadie Flap Satchel in Spectator Saffiano Leather.

New York—Shares of Coach Inc. fell in early trading today after the leatherwoods company announced disappointing fourth quarter results. Coach Inc. also agreed to sell its Reed Krakoff brand to a group led by Reed Krakoff.

For the quarter ended June 29, Coach posted a 12% drop in net income to $221 million, or 78 cents a share, compared to $251 million, or 86 cents a share, in the year-ago period.

Excluding special items like restructuring charges, Coach said it earned 89 cents, matching analysts’ average estimate.

Net revenue rose 5.8% to $1.22 billion, missing analysts’ estimate for $1.24 billion in sales. Gross margin was flat at 72.6%.

“While we maintained our outstanding profitability levels, we were not satisfied with our performance in the women’s handbag and accessories category in North America,” said Lew Frankfort, chief executive.

Total North American sales increased 6% to $825 million. North American direct sales rose 5% for the quarter with comparable store sales down 1.7%. Coach’s sales in North American department stores were slightly above prior year while shipments into this channel also rose, the company said.

International sales rose 6.6% to $386 million. Sales in China, which Coach has made the cornerstone of its international strategy, climbed 35%. Sales were up 4% in Japan on a constant-currency basis.

Changes in Top Executives

Coach had begun exploring strategic options for the Reed Krakoff brand in April after Krakoff decided not to renew his contract with Coach to focus on his namesake brand full time. In June, Coach named former Loewe creative director Stuart Vevers as the new executive creative director.

Coach expects the sale of Reed Krakoff will close in its fiscal first quarter and Krakoff will leave after the sale is completed.

Financial terms weren’t disclosed, but Coach said the transaction will have a material impact on its first quarter results.

Separately, Coach announced that Mike Tucci, president of its North American group and Jerry Stritzke, chief operating officer, will step down at the end of August.

No replacement for Stritzke was named, however, Coach said Francine Della Badia, currently executive vice president responsible for all North America retail and global men’s and factory merchandising, will succeed Tucci as president of North America Retail.

Other new roles in the company include: David Duplantis, executive vice president, digital marketing, is taking on the new role as president of Global Digital and Customer Experience. Javan Bunch, senior vice president of licensing will assume the expanded role of senior vice president and president, North America Wholesale and Licensed Categories, reporting into Todd Kahn, general counsel in his expanded role as executive vice president, Corporate Affairs. Ian Bickley, president, Coach International, is expanding his role to take on responsibility to include all international direct retail businesses as president, International Group. Stephanie Stahl, currently senior vice president, strategy and consumer insights, is taking on an expanded role as executive vice president, marketing and strategy.

Della Badia and Stahl, along with Bickley, Duplantis and Kahn will report to Victor Luis, Coach’s president.




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