Coach Q3 2016 Earnings And Revenue Beats Expectations

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Coach

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Highlights Of The Quarter:

1) Turnaround of Coach’s North American Business

  • Same-store sales at the retail stores were unchanged, after a number of quarters of negative comps, representing the fourth consecutive quarter of improvement.
  • While store and mall traffic was soft, due to increased internet sales, more was spent per customer versus a year prior.
  • Positive comps were seen in the renovated luxury concept retail outlets.
  • Low single-digit growth in the North American premium women’s handbag and accessories market.
  • Higher premium handbag purchases, as compared to six months ago.
  • The above $400 price bracket rose in penetration, forms ~40% of handbag sales, up from ~30% last year.
  • Handbag AUR (Average Unit Retail) has risen to over $300 in the quarter, for the first time since FY 2009.

2) Chinese Market And Chinese Tourists Driving International Sales

  • Greater China third quarter sales increased 2%.
  • This was driven by double-digit growth and positive comps on the Mainland, offset by weakened markets in Hong Kong and Macau due to a slowdown in inbound tourist traffic from the Mainland.
  • Annual sales forecast of $600M, reflecting continued softness in Hong Kong and Macau.
  • Decline in Chinese tourists to North America and Europe, notably France, affected performance there.
  • Growth in Chinese tourist spending in Japan, Korea, and Southeast Asia resulted in high growth.
  • Japan sales grew by 7% on a constant currency basis, benefiting from increased Chinese tourist traffic and a positive response to the new modern luxury stores.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Coach.
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