A resurgent Coach to trim department store distribution

The momentum at Coach Inc. continued in the fourth quarter, as the company reported healthy same-store sales growth at its North American stores and better-than-expected earnings.



The luxury handbag and accessories retailer also said it plans to reduce its presence in the wholesale channel (which for Coach is mostly department stores), where its sales continue to fall. Coach sales at North American department stores in the fourth quarter declined at a mid-teens rate versus prior year on a 13-week basis, while net sales into department stores declined high single digits.



Coach’s profit for the three-month period ended July 2, 2016, was $81.5 million, up from $11.7 million in the year-ago period. On an adjusted basis, its net income would have been $126 million representing 47% year-over-year growth.



Revenue increased 15% to $1.15 billion, short of analysts expectations of $1.17 billion.



Same-store sales at Coach’s stores in North American rose 2%, its best metric since the June 2012 quarter.



“Our strong fourth quarter results – in which we achieved positive North America comparable store sales and drove increases across key financial metrics- capped a year where we returned the Coach brand to growth,” said Victor Luis, CEO, Coach. “In the quarter, our North American direct business accelerated, while we continued to implement strategic actions to elevate our positioning and streamline our distribution in the department store channel.”



In what it called a “strategic decision to elevate the Coach brand’s positioning” in the North American wholesale channel (which for Coach is mostly department stores), the company plans to close about 25% of its doors in the channel and reduce its markdown allowance.