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Evaluating Coach’s Fiscal 4Q16 Results

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Coach’s 4Q16 key financial highlights

  • Net sales stood at $1.15 billion—grew 15% YoY (year-over-year)
  • North America comparable store sales grew by 2% during the quarter
  • Adjusted net income stood at $126 million—grew 48% on a yearly basis
  • Adjusted diluted earnings per share stood at $0.45—registered a 47% YoY increase
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Revenue rose 15%

Coach (COH) reported a 15% YoY increase in its top line to $1.15 billion in 4Q16. Fiscal 2016 net sales rose 7% on a reported basis and 9% on a constant currency basis to $4.5 billion.

The company achieved positive sales comps in North America for the first time in over three years. Coach’s business had been under pressure. It faced increasing competition from newer entrants like Michael Kors (KORS), Kate Spade (KATE), and Tory Burch in the affordable luxury market. The company is in the process of implementing a transformation plan designed to push its sales and margins.

Coach’s top line growth in 4Q16 is better than its peers such as Michael Kors and Ralph Lauren (RL). They grew by 0.2% and -4% in the last reported quarters. However, its performance trails Kate Spade. Kate Spade grew its sales by more than 13% in the most recent quarter.

Investors looking to invest in Coach through ETFs can choose to invest in iShares Morningstar Mid-Cap Value ETF (JKI). Coach has a weight of ~0.81% in JKI.

What drove the company’s top line?

Coach’s 4Q16 results were driven by the positive impact of an additional 14th week. It contributed nearly $84 million towards the company’s total revenue. Net sales for the Coach brand grew 11% to $1.07 billion, while the Stuart Weitzman brand reported sales of $84 million in 4Q16.

While talking about the company’s performance in the fourth quarter, Victor Luis, Coach’s CEO, commented that “Our strong fourth quarter results – in which we achieved positive North America comparable store sales and drove increases across key financial metrics- capped a year where we returned the Coach brand to growth. At the same time, we elevated brand perception globally. I couldn’t be more pleased with our team’s execution of the transformation plan over the last two years, as we tracked to our goals in spite of the significant and unanticipated volatility in tourist spending flows, as well as macroeconomic and promotional headwinds.”

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