Coach sales drop 12% in fiscal Q4
New York based luxury brand COACH has reported sales of $1.00 billion for its fourth fiscal quarter ended June 27, 2015, including a $43 million contribution from the May acquisition of Stuart Weitzman. This compared with $1.14 billion reported in the same period of the prior year, represents a decrease of 12%. On a constant currency basis, total sales declined 8% for the period.
Net income for the quarter totaled $85 million. The acquisition of Stuart Weitzman contributed $2 million to net income. Reported net income for the fourth quarter of FY15 totaled $12 million compared to the prior year’s reported net income of $75 million.
For the fiscal year ended June 27, 2015, Coach, Inc. net sales declined 13% to $4.19 billion from $4.81 billion the prior fiscal year while net income excluding transformation-related charges and acquisition costs was $531 million versus $870 million in the prior year. On a constant currency basis, sales declined 11% for the year.
Victor Luis, Chief Executive Officer of Coach, Inc., said, “We are pleased with our fourth quarter and full year progress on the comprehensive plan we laid out a year ago to reinvigorate our brand and business. Our execution of these strategic initiatives and resulting performance has been consistent with our expectations and underscores our confidence in the path we’ve chosen. As we moved through Fiscal 2015, we drove sequential improvement in our North America bricks and mortar business while dramatically reducing the number of promotional impressions in the marketplace against a backdrop of heightened promotional activity. In addition, our international businesses posted moderate growth on a constant currency basis, highlighted by a double-digit increase in Europe and strong growth in China, driven entirely by the Mainland, as sales approached $600 million.”
“Importantly, our brand transformation gained momentum across our three key brand pillars: product, stores and marketing. We successfully introduced Stuart Vevers’s product across our multi-channel distribution, continued to open and renovate modern luxury concept stores globally, and had an overwhelmingly positive reception to our Men’s and Women’s fashion presentations. ”
The Company ended FY15 with inventory of $485 million including $33 million associated with the acquisition of Stuart Weitzman. This compared to ending inventory for the Coach brand of $526 million for FY14. Therefore, inventory declined 8% on a consolidated basis and 14% for the Coach brand.
Fourth fiscal quarter and fiscal year sales results in each of Coach’s primary segments were as follows:
- Total North American sales decreased 20% on a reported basis for the quarter to $556 million from $691 million last year, and 19% on a constant currency basis
- International sales decreased 5% for the quarter to $392 million from $414 million last year. On a constant currency basis, sales rose 3% for the quarter
- Sales in China rose 5% in dollars and 4% in constant currency on slower distribution growth and a slight decline in comparable store sales. As expected sales on the Mainland were strong, growing at a double digit pace driven in part by positive comps, while results in Hong Kong and Macau were quite weak given significantly lower tourist trends from the Mainland.
- Sales in Japan rose 2% versus prior year on a constant-currency basis, while dollar sales declined 15%, reflecting the weaker yen.
- European sales grew at a double digit pace
For the full year, international sales declined 1% to $1.62 billion from $1.64 billion generated in fiscal 2014. On a constant currency basis, sales rose 4% for the year. China reported results were on plan, with total sales growing 9% in both dollars and in constant currency to about $595 million with positive comparable store sales and slower distribution growth.
In Japan, sales were down mid-single-digits for the year on a constant currency basis, as expected, due to the overhang of the tax increase, while dollar sales declined 17%, reflecting the weaker yen. Sales in constant currency for the other directly operated Asian businesses were up slightly in local currency. Europe sales were robust, with sales up nearly 50% for the year, at $90 million, in line with forecast.
Fiscal Year 2016 Outlook
The Company currently expects Coach stand-alone brand revenues for Fiscal 2016 to increase by low-single digits in constant currency on a 52-week basis consistent with prior guidance. Gross margin for the Coach brand is projected to be in the area of 70% on a constant currency basis.
The company is forecasting Stuart Weitzman brand sales in the area of $335 million on a dollar basis for fiscal 2016, driving Coach, Inc. total revenue growth to high-single digits.