Coach continues to experience rapid growth in China
21 Apr '10
6 min read
For the quarter, operating income totaled $249 million, up 34% from the $185 million reported in the comparable year-ago period, while operating margin was 30.0% versus 25.1% reported for the prior year. During the quarter, gross profit rose 17% to $616 million from $525 million a year ago. Gross margin was 74.1% versus 71.0% a year ago, benefitting primarily from lower manufacturing costs.
SG&A expenses as a percentage of net sales, at 44.1%, compared to 45.9% in the year-ago quarter. Excluding the impact of the one-time charge in the year-ago period, third quarter 2009 operating income totaled $199 million, the operating margin was 26.9% and the SG&A expense ratio was 44.1%.
The company also announced that during the third fiscal quarter, it repurchased and retired nearly 11.3 million shares of its common stock at an average cost of $35.52, spending a total of $400 million. At the end of the period, approximately $10 million remained under the company's previous repurchase authorization.
Third fiscal quarter sales in each of Coach's primary channels of distribution were as follows:
• Direct-to-consumer sales rose 15% to $726 million in the third quarter from $634 million last year. North American comparable store sales for the quarter rose 5.1%. In Japan, sales declined 1% on a constant-currency basis, while dollar sales rose 2%, reflecting the stronger yen year-over-year. China sales were robust, as retail sales continued to comp at a double-digit rate. • Indirect sales decreased 1% to $105 million in the third quarter from the $106 million reported for the prior year. This decline was primarily due to slightly reduced shipments into U.S. department stores as the company continues to tightly manage inventories in that channel. However, sales at POS in both U.S. department stores and in international wholesale locations rose during the period.
During the third quarter of fiscal 2010, the company opened two retail stores and closed two others, while opening one factory store in North America, bringing the total to 343 retail stores and 119 factory stores as of March 27, 2010. In Japan, Coach opened its first men's store, a factory store and a duty-free wholesale location. Therefore, at the end of the quarter there were 166 total locations in Japan.
“Our growth demonstrates our ability to manage our business nimbly, while investing prudently for the future. We're accelerating our distribution plans to leverage the emerging market opportunity with a particular focus on China, while also exploring new geographies capitalizing on the increasing popularity and recognition of the brand with discerning consumers globally. And, with a business model that generates significant cash flow and with virtually no debt, we are in a position to take advantage of profitable growth opportunities, while continuing to return capital to shareholders,” Mr. Frankfort concluded.
For the nine months ended March 27, 2010, net sales were $2.657 billion, up 8% from the $2.453 billion reported in the first nine months of fiscal 2009. Net income totaled $539 million, up 11% from the $486 million reported a year ago, excluding the one-time charge, while earnings per share rose 14% to $1.69 from $1.49 on the same basis. Including the impact of the one-time charge last year, net income for the nine months totaled $478 million and earnings per share were $1.46 in the third quarter of FY09.
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