On a constant currency basis sales declined 3% for the quarter. Net income for the period totaled $297 million, with earnings per diluted share of $1.06. This compared to net income of $353 million and earnings per diluted share of $1.23 in the prior year’s second quarter.
For the second fiscal quarter, operating income totaled $436 million, compared to $527 million reported in the prior year, while the operating margin was 30.7% versus 35.0%. During the quarter, gross profit totaled $983 million compared to $1.09 billion a year ago. Gross margin was 69.2% versus 72.2% reported in the prior year. SG&A expenses as a percentage of net sales was 38.5%, compared to the 37.2% reported in the year-ago quarter.
The company also announced that during the second fiscal quarter, it repurchased and retired about 3.3 million shares of its common stock at an average cost of $52.99, spending a total of $175 million and taking the year-to-date total to $350 million. At the end of the period, approximately $1.0 billion remained under the company’s current repurchase authorization.
For the six months ended December 28, 2013, net sales were $2.57 billion, down 4% from the $2.67 billion reported in the first six months of fiscal 2013. On a constant currency basis, sales declined 1% for the period. Net income totaled $515 million compared to $574 million reported a year ago, while earnings per diluted share were $1.82 versus $2.00.
Second fiscal quarter sales results in each of Coach’s segments were as follows:
Total North American sales decreased 9% to $983 million from $1.08 billion last year. North American direct sales declined 8% for the quarter with comparable store sales down 13.6%. At POS, sales in North American department stores were slightly below prior year while shipments into this channel declined as planned.
International sales increased 2% to $425 million from $418 million last year. On a constant currency basis, International sales grew about 11%. As noted, sales in China rose about 25% and the business is on track to meet annual guidance of $530 million.
"In Japan, sales declined 2% on a constant-currency basis, while dollar sales were 21% below the prior year, reflecting the weaker yen. Shipments into international wholesale accounts increased significantly, as expected, due to timing of a Chinese holiday while underlying POS sales trends increased slightly.
Mr. Luis added, “We have taken the initial steps in Coach’s transformation across all aspects of the consumer experience - product, stores and marketing. Notable was the success of the Borough bag - a prelude to a comprehensive re-platforming of our women’s product assortment across bags, accessories and lifestyle categories coming this fall."