Coach ad­vances af­ter new de­signs help profit beat fore­casts

The Pak Banker - - BUSINESS -

NEW YORK: Coach Inc., the largest U.S. lux­ury-handbag maker, surged the most in more than five years af­ter its profit topped es­ti­mates and the com­pany raised its full-year earn­ings out­look. Profit ex­clud­ing some items was 68 cents a share in the se­cond quar­ter, the New York-based com­pany said in a state­ment Tues­day. An­a­lysts es­ti­mated 66 cents, on av­er­age. Af­ter the re­sults, the shares gained 9.8 per­cent to $33.33 at the close of trad­ing in New York, the big­gest gain since Oc­to­ber 2010. Af­ter years of los­ing ground, Coach is win­ning back cus­tomers with new de­signs and up­dated stores. The re­tailer had suf­fered from in­creased com­pe­ti­tion from de­sign­ers like Kate Spade & Co. and Michael Kors Hold­ings Ltd. The im­prove­ments have al­lowed Coach to re­duce its de­pen­dence on dis­counts, which hurt profit mar­gins.

"This com­pany is see­ing a turn­around very much on plan, led by the full-price chan­nel, which is very im­pres­sive given the handbag sec­tor and com­peti­tors be­ing very pro­mo­tional," said Anna An­dreeva, a New York-based an­a­lyst at Op­pen­heimer & Co. Net in­come fell 5.9 per­cent to $188.4 mil­lion, ex­clud­ing items. Sales gained 4 per­cent to $1.27 bil­lion in the quar­ter, meet­ing an­a­lysts' pro­jec­tions. Coach didn't spec­ify the amount by which it is rais­ing its out­look for op­er­at­ing in­come. The com­pany main­tained its fore­casts for sales and op­er­at­ing mar­gin at the Coach brand. Ex­ec­u­tive Cre­ative Di­rec­tor Stu­art Vev­ers, who joined Coach in 2013, is in­flu­enc­ing the look of prod­ucts and stores, em­brac­ing the in­dus­try trends to­ward cross-body bags and smaller purses, while re­duc­ing the promi­nence of lo­gos. "The prod­uct is much im­proved," An­dreeva said. The com­pany also said on a con­fer­ence call Tues­day that it is ex­plor­ing the sale of its stake in its Hud­son Yards head­quar­ters in New York. Given the soar­ing Man­hat­tan real es­tate mar­ket, now is "the right time" to ex­plore a trans­ac­tion and en­ter into a long-term lease there, Chief Fi­nan­cial Of­fi­cer Jane Nielsen said on the call. It's un­likely that any sale or trans­ac­tion would close un­til af­ter the fis­cal year, she said.

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