Coach (COH) Second-Quarter FY2016 EARNINGS Review: Turnaround Yields Results

Executive Summary

• Coach reported fiscal-second-quarter 2016 EPS of $0.68, excluding onetime items, versus the consensus estimate of $0.66.
• The period represented improvement in the company’s turnaround plan, which it began to implement several years ago. The company’s store channel improved, led by full-price stores, while outlet stores also improved, despite lower tourist traffic and a highly promotional environment.
• Total sales were up 4%, or up 7% on a constant-currency basis, to $1.27 billion. Coach brand sales declined by 3%, to $1.18 billion, while Stuart Weitzman sales totaled $94 million.
• Coach maintained its full-year revenue guidance (on a constant-currency basis) and its operating margin guidance, though it is raising its forecast for operating income based on second-quarter results for the Stuart Weitzman business. Total revenue is expected to increase in the low single digits, while operating margins are expected to be in the mid- to high teens.