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Coach Forecast Signals Turnaround On Track

Coach rose 0.6 percent to $36.10 in early trading in New York. The shares had increased 9.7 percent this year.
Coach Autumn/Winter 2016 campaign | Source: Coach
By
  • Bloomberg

NEW YORK, United Kingdom — Luxury handbag maker Coach Inc. signalled that its turnaround is making progress, forecasting that sales will still gain despite a tough environment.

The fashion house reiterated that revenue will increase by a low- to mid-single-digit percentage in the year through June, maintaining a forecast it provided in August. The New York-based company also reiterated in a statement Tuesday that net income and earnings per share will grow by a double-digit percentage.

Coach is removing its merchandise from 250 department stores, where ailing traffic has forced it to pile on steep discounts to sell its wares. The move helped the company trim its inventory by 5 percent to $547 million last quarter. Coach also has been introducing new items and limited-edition offerings to entice shoppers to pay full price.

“We are encouraged that the turnaround is on track,” said Scott Krasik, an analyst at the Buckingham Research Group. Still, Krasik, who has a neutral rating on the stock, said he wants to see evidence that the handbag category overall is improving or that Coach plans to make a large strategic action before he will raise his view on the shares.

Coach rose 0.6 percent to $36.10 at 8:22 a.m. in early trading in New York. The shares had increased 9.7 percent this year through Monday.

Sales Gain

Sales rose 0.7 percent to $1.04 billion in the fiscal first quarter, ended Oct. 1. That just missed analysts’ $1.07 billion average estimate. Profit was 45 cents a share, excluding some items, matching analysts’ average projection.

Comparable-store sales in North America rose 2 percent, trailing the average estimate for a 2.2 percent increase compiled by Consensus Metrix.

"Our solid first-quarter results, despite the volatile economic environment and global macroeconomic headwinds, reflect the continued progress we are making in our transformation and pursuing our vision of modern luxury," chief executive officer Victor Luis said in the statement.

By Stephanie Wong; editors: Nick Turner and Kevin Orland.

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