Coach Profits Jump, Kate Spade Comes on Board

Coach Profits Jump, Kate Spade Comes on Board”

Earnings, adjusted for non-recurring gains, came to 50 cents per share.

The company's net profits almost doubled in the period to $151.7 million, or 53 cents a diluted share, from $81.5 million, or 29 cents, a year earlier.

Coach posted revenue of $1.13 billion, compared to the $1.51 billion analysts surveyed at Factset predicted and the $1.15 billion in revenue the company generated in the year-ago period.

Net sales fell 1.8 percent to $1.13 billion, missing the average analyst estimate of $1.15 billion. The KATE SPADE North America segment consists of the Company's kate spade NY and JACK SPADE brands in North America.

Coach noted that, as planned, sales at North American department stores declined approximately 40% at a POS and approximately 20% on a net sales basis as the company has now started to anniversary the pullback in shipments into the channel.

"Over the past half year, Coach has put considerable effort into store displays and collections and, in our opinion, these now look very compelling and engaging", he said. COH forecast 2018 EPS of $2.35 to $2.40, well below the $2.50 that Wall Street is looking for.

North America same-store sales increased in the "mid-single-digit" percentage range, beating the FactSet consensus of 3.6% growth.

Coach and other luxury accessories retailers, including Michael Kors Holdings Ltd (KORS.N), have been trimming sales to department stores - where over-reliance on discounting has become the norm - in order to sell them at full price through their own stores to help retain the brand's premium cachet.

"Three years ago we laid out an ambitious plan to transform the Coach brand, with a goal of increasing relevancy and improving consumer perceptions", Luis said in a statement.

For the current fiscal year 2018, the company expects earnings to be between $2.35 to $2.40 per share, below the projection of $2.49 per share. "We generated positive Coach brand North American comps in each quarter, while driving solid global Coach brand sales gains, notably in Europe and Mainland China". Guidance includes the recently closed $2.4 billion Kate Spade acquisition. Instinet lowered shares of Kate Spade & Co from a "buy" rating to a "neutral" rating and reduced their price target for the company from $25.00 to $18.50 in a research report on Tuesday, May 9th.

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