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Transformation on Track: Will 2016 Bring a Coach Renaissance?

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Nov. 22 2019, Updated 7:23 a.m. ET

Coach declares results for fiscal 2Q16

Affordable luxury pioneer Coach (COH) reported fiscal 2Q16 results on Tuesday, January 26, before the market opened. The quarter ended on December 26, 2015. The company beat consensus Wall Street analyst expectations for adjusted EPS (earnings per share). Coach’s EPS came in at $0.68 in the quarter, 2.7% higher than the market estimate of $0.66. Coach’s EPS, however, fell by 5.6% on a year-over-year basis.

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Coach’s peers Michael Kors (KORS), Ralph Lauren (RL), and Kate Spade (KATE) are due to declare earnings on February 2, February 4, and in early March, respectively. S&P 500 components COH, KORS, and RL together constitute 0.13% of the holdings in the SPDR S&P 500 ETF (SPY), and 1% in the Consumer Discretionary Select Sector SPDR ETF (XLY).

Sales performance

Coach reported sales of ~$1.3 billion in fiscal 2Q16, almost in line with consensus Wall Street analyst estimates. Sales grew 4.4% year-over-year, helped by the inclusion of premium footwear brand Stuart Weitzman, whose sales came in ahead of expectations, which we’ll discuss in part six.

But the quarter wasn’t without its headwinds. Same-store sales in North America declined by 4%, hurt by traffic declines and higher discounting.[1. According to comments by Victor Luis, CEO of Coach] In keeping with its stated strategy, however, Coach reduced the number of eOutlet events during the quarter, which pressured comps by one percentage point. Coach expects to see comps in North America return to positive territory by fiscal 4Q16. You’ll read about the company’s performance in North America and its outlook in part three.

Coach is in the midst of a brand makeover. In line with its premium image, Coach has been revamping both retail and outlet stores, under its modern luxury concept. It’s also in the process of bringing about changes to wholesale doors, in terms of store layouts and other operational changes. Also, the company plans on opening stores in premium locations, particularly flagships in prominent cities. The next article discusses Coach’s revenue performance in more detail.

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