Evaluating Coach’s 1Q17 sales
Coach (COH) reports revenues under two major segments – the Coach brand and the Stuart Weitzman brand. The Coach brand, the company’s primary business, accounts for more than 90% of its top line. The company reports its North American and international segments separately for the Coach brand. In this section, we’ll evaluate the performance of each of the segments.
North America sales fall 3% in 1Q17
The Coach brand’s North American business, which accounted for 53% of the company’s top line, reported a fall of 3% during 1Q17. Net sales stood at $545 million, compared with $561 million in 1Q16. The decline was a result of the company’s intentional pullback from US department stores such as Macy’s (M), Nordstrom (JWN), and Sears (SHLD).
North American comparable store sales rose 2% during the quarter. Brick-and-mortar sales comps grew ~4%. E-commerce sales came under pressure from a further deterioration in Coach’s eOutlet flash sale business.
International sales jump on strong European business
Coach’s international business continued to report robust growth. Sales were up 7% to $395 million during 1Q17. Its European business grew at a double-digit pace, driven by double-digit comps growth and a new distribution setup. Greater China sales remained flat on a reported basis and rose 5% on a constant-currency basis.
Japan sales rose 11% on a reported basis, supported by a stronger dollar. However, on a constant-currency basis, sales fell 7%, impacted by a fall in Chinese tourist spending.
Stuart Weitzman business remains flat in 1Q17
Coach acquired Stuart Weitzman, a leading American luxury designer footwear brand, in January 2015. The brand contributed 8.6% of Coach’s total revenue in 1Q17.
As wholesale shipment timing impacted sales, the Stuart Weitzman business remained flat between 1Q16 and 1Q17. Investors looking for exposure to Coach could opt for the iShares Morningstar Mid-Cap Value ETF (JKI). Coach makes up ~0.75% of JKI. Continue to the next section for a look at the company’s margins and profitability in 1Q17.