Coach Q3 profit tops estimates; COO out in job reduction

Coach on Tuesday reported its first growth in quarterly profit in three years. The retailer also announced a series of management changes and corporate job reductions resulting in a pre-tax charge of about $65 million to $80 million in the fourth quarter.



Coach said it would cut an unspecified number of corporate jobs, and announced that president and COO Gebhard Rainer and global marketing president David Duplantis would leave the company.



The retailer reported third-quarter earnings that rose to $112.5 million, or 40 cents a share, from $88.1 million, or 32 cents a share, in the year-ago period. Excluding non-recurring items, adjusted earnings per share came to 44 cents, beating the FactSet consensus of 41 cents.



Total revenue for the quarter, ended March 26, rose 11.2% to $1.03 billion, topping estimates of $1.02 billion. Same-store sales in North America were flat, ending three years of decline.



“We are very pleased with our third quarter performance, highlighted by a return to growth for the Coach brand, driving overall operating profit growth,” said Victor Luis, CEO. “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, as well as macroeconomic and promotional headwinds. Both our retail and outlet stores in North America sequentially improved from the holiday quarter and e-commerce was an overall contributor as well.”



Luis said the company is track to return to positive comps in North America in the fourth quarter.



Coach announced a series of operational efficiency initiatives focused on creating “an agile and scalable business model,” with the initiatives primarily related to the reduction of corporate staffing levels globally, as well as accelerated depreciation, mainly associated with information systems retirement, technology infrastructure charges related to the initial costs of replacing and updating its core technology platforms, and international supply chain and office location optimization.



“These actions will allow us to emerge as a brand-led company with fewer layers, larger spans of responsibility and a consistent global voice across merchandising and marketing,” Luis said.



In keeping with its goal, Coach said it was making the following changes:



• Andre Cohen is being promoted to president, North America and global marketing, adding North America wholesale as well as global marketing, customer experience and digital to his responsibilities.



• Todd Kahn is being promoted to president, chief administrative officer and secretary and will expand his scope to include information technology, supply chain, global environments and procurement.