NEW YORK — Anyone looking for signs of weakness in the high-end segment is going to have to wait.
On Monday, Coach Inc. delivered stellar first-quarter results with profits soaring 53.5 percent on a 30.5 percent sales gain. And regarding the holiday shopping season, management at the company expects another good year.
"As most of you know, during the last several years, we have established a lane between the moderate segment and the old luxury accessory brands, which we termed ‘accessible luxury.' This positioning, coupled with our brand and business equities, is Coach's competitive advantage yielding staying power, more predictable results and increasing productivity," said Lew Frankfort, chairman and chief executive officer, on a conference call.
Frankfort said U.S. retail comps have been in the double digits for the first quarter in each of the last four fiscal years, and said on average, Coach's retail stores are "twice as productive as they were just four years ago."
For the three months ended Oct. 1, net income, including the impact of stock option expense, came in at $93.6 million, or 26 cents a diluted share, compared with $61 million, or 16 cents, in the same year-ago quarter. Wall Street analysts had the company pegged to earn 23 cents a share, according to Thomson Financial. Excluding the expense for stock options, net income was $100 million, or 26 cents, versus $68 million, or 17 cents, a year ago. Sales in the quarter climbed to $449 million from $344.1 million in the prior year.
Shares of Coach rose $1 to close at $32.25 in trading Tuesday on the New York Stock Exchange, with 4.7 million shares trading hands compared with an average three-month trading volume of nearly 2.7 million shares. On Monday, shares of Coach fell to $31.25 on a trading volume of nearly 5.2 million shares, compared with Friday's close of $32.26. The sell-off followed a research note Monday from Merrill Lynch expressing caution, in part, over possibly less traffic at the outlet centers due to higher energy costs.
After posting results, Coach provided second-quarter guidance, projecting earnings per share of at least 45 cents on sales of $645 million, excluding the 2 cent-per-share cost for option expensing. For the full fiscal-year 2006, the company expects sales in the $2.1 billion range, up 23 percent from last year, and diluted earnings per share of $1.28 before option expense. Analysts are forecasting earnings per share at $1.26. Including option expense, the company expects EPS of at least $1.18 for the year.During the call, Frankfort said the quarter's results were driven primarily by "strong gains in U.S. department store and international wholesale sales." As for the outlet stores, or what Coach calls its U.S. factory store business, Frankfort said that operation has "remained remarkably strong this quarter, even in the wake of higher gasoline prices, given the vibrancy of the brand, the appeal of the Coach product, our exceptional value and the continued relative strength of premium factory centers."
On the call, Michael Tucci, president of Coach's Retail North America division, highlighted some of the key product offerings during the quarter. They included Hamptons Weekend in a new fall palette, an updated Soho collection in leather and suede, the Chelsea handbag group in nuboc and the well-received Optic Signature line. Tucci said the limited-edition styles — such as the Optic Signature chenille tote at $598 and the Signature python stripe satchel at $498 — all "blew out," which spoke to the company's opportunity to "selectively trade up our average retail [price] in handbags." The product line for holiday gift-giving will feature metallics, fur and beading embellishments, he said.
Neely Tamminga, an analyst at Piper Jaffray, reiterated an "outperform" rating of Coach following the earnings report. She wrote in her research note that she is "encouraged by a 9 percent increase in average handbag prices from $233 to $255, driven in part by traction achieved with limited-edition handbags." According to Tamminga, the company's diversification across product and geography is a positive, as well as the "abundant growth opportunities in Japan."
Coach said direct-to-consumer sales, which now include sales by Coach Japan, rose 29 percent in the quarter to $315 million from $244 million a year ago. Sales in Japan gained 24 percent in constant currency, fueled by new store openings, expansions and mid-single-digit sales gains in comparable retail locations, the company said. The company said U.S. comps rose 25.1 percent, with retail stores up 14.4 percent and factory stores up 35.8 percent. Indirect sales, which now exclude Coach Japan, rose 34 percent to $134 million from $100 million last year.
In yet another fashion show shuffle, @elleryland is moving its show in sync with the Paris couture calendar — though the brand is still keeping one foot on the city’s ready-to-wear schedule. Their runway show in January will coincide with the launch of a new strategy: designing two main collections each year instead of four, which will then be released in four drops. “As we all know, the system needs to change. We need to show sooner to give time back to artisans and designers to do what they do best — create,” said founder Kym Ellery. #wwdnews #wwdfashion (📷: @kukukuba)
@maxmara’s classic 101801 coat was the cornerstone of its pre-fall 2018 collection. The design team expanded the traditional double-breasted, kimono-sleeved style into a trapeze coat, lean belted styles and a peacoat and presented them in monochromatic looks – like the camel one pictured here. #wwdfashion #prefall18 (📷: George Chinsee)
The @cfda has shifted the dates of #NYFW, with Men’s showing on February 5 through February 7, and Women’s will directly follow, running from February 8 through 14. The preliminary schedule will be released on the CFDA’s web site in the next few days, but Mark Beckham, VP of marketing for the CFDA, revealed that @rafsimons will be back to close the men’s-specific part of the week with a show on February 7 #wwdfashion (📷: Kelly Taub)
@ferragamo is introducing a new space dedicated to the development of women’s and men’s leather good samples. The laboratory, which is created eco-friendly materials and designed to reduce the environmental impact of the manufacturing processes, will allow the company to expand its accessories offering through traditional artisanal approaches. #wwdfashion (📷: @aitorrosasphoto)
How does a “regular, degular, schmegular” girl from the Bronx, N.Y., become a Grammy-nominated artist with a certified platinum record in less than a year? Call it the @iamcardib come up. The 25-year-old has become a musical sensation, and the fashion world is taking note. “If I could describe her style I would say drama. She’s really into the dramatics,” says Cardi B’s stylist @kollincarter. See how Carter styles her bold and out there looks with the link in bio. #wwdfashion
“There is no formula. There is no guideline. I can watch Ted Talks all day, but there is no one who can advise me on exactly what it is I should be doing,” said @ronniefieg, CEO of @kith, in an interview with WWD’s @ariahughes at the brand’s new SoHo office in Manhattan. Head to WWD.com to see how Fieg went from hanging out in shoe stockrooms at 13 to building his own business. #wwdfashion (📷: @weston.wells)
@fearofgod and @maxfieldla have teamed up on a pop-up installation. The store, located in the gallery space across from Maxfield’s Melrose Ave location, is the site of the brand’s House of God pop-up in which Fear of God founder @jerrylorenzo has created a church-inspired installation. A dozen vintage church pews sit in front of an LED screen playing 90s gospel singers in an effort to re-create an environment akin to a Southern Baptist Church, Lorenzo explained. Read more about the pop-up on WWD.com #wwdfashion (📷: Jennifer Johnson)
Known for his sleek, sophisticated American glamour, Norman Norell is the subject of an upcoming exhibition at @fitnyc. “Norell: Dean of American Fashion,” which runs from February 9 through April 14, will feature approximately 100 ensembles and accessories. His best work is exemplified by the designer’s glittering “mermaid” gowns frosted with thousands of hand-sewn sequins – like the one pictured. (📷: William Helburn) #wwdfashion
For pre-fall 2018, @balmain didn’t let go of the glitz. A crystal embroidered baseball jacket priced at around $40,000 hangs in the “couture” section of the brand’s first men’s pre-collection. Sporting the words “Balmain Army” across the back, the item took around two months to make. “When it was completed, it was like Christmas, it was like, ‘It’s done, it’s exactly what I wanted,’” said Balmain’s creative director @olivier_rousteing during a tour of the collection in a Paris showroom on Monday. #wwdfashion