Coach Tops Expectations as Sales Improve

By Lisa Beilfuss 

Coach Inc. logged stronger-than-expected earnings growth in its latest quarter as sales improved markedly, suggesting the handbag retailer's turnaround efforts are taking hold.

Chief Executive Victor Luis highlighted the "return to growth for the Coach brand."

"Our performance was in line with expectations and reflected the consistent execution of the transformation initiatives put into place nearly two years ago, in spite of volatile tourist spending flows," he said.

Amid flagging sales, Mr. Luis has been steering a turnaround marked by fewer promotions, remodeled stores and expanded offerings of other types of accessories. Earlier this year, he shook up Coach's management ranks in another effort to revitalize the business.

Alongside the improved quarterly results, the retailer unveiled more initiatives that include an unspecified number of job cuts and more management changes. Coach said it would take a charge of $65 million to $80 million in the current quarter stemming from the layoffs and other moves.

In the company's March quarter, sales at existing North American stores were flat after plunging 22% in the previous quarter and declining 23% a year earlier. The company said Tuesday that it is on track to post positive same-store sales in the current quarter.

Meanwhile, international sales rose 5% on strength in China and Europe, despite a negative impact from the strong dollar.

In all, the company reported a profit of $112.5 million, or 40 cents a share, up from $88.1 million, or 32 cents a share, a year earlier. Excluding certain items, earnings per share rose to 44 cents from 36 cents.

Revenue grew 11% to $1.03 billion. Analysts projected 41 cents in adjusted earnings per share on $1.02 billion in sales, according to Thomson Reuters.

Coach backed its previous sales and margin guidance for the fiscal year ending in June.

Write to Lisa Beilfuss at [e-mail]

(END) Dow Jones Newswires

April 26, 2016 08:14 ET (12:14 GMT)

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