Some things never change, including consumer behavior. Maybe the great housing boom/bust did force a few consumers to change their ways, but as the economy has rebounded, the demand for high-end consumer goods has gone along for the ride. As one of the more popular brands around, Coach (NYSE:COH) continues to deliver solid financial performance.
On Target Performance
Even with the significant impact of the Japanese earthquake, Coach once again managed to modestly beat estimates. Revenue rose 14% this quarter, fueled by direct-to-consumer sales growth of 15%. North American comps were up about 10% (and ahead of expectations), while Japanese sales fell 9% in local currency. Such was the impact of currency moves, though, that Japanese sales were actually flat on a reported (dollars) basis.
Coach did not perform quite as well on the profitability side. Like so many companies, Coach is seeing pressure from currency, materials, shipping, and so forth. Gross margin declined about 140 basis points, while operating income (on a non-GAAP basis) rose 12%. Still, it is clearly worth noting that at over 29%, Coach produces exceptionally good margins (as well as very high returns on assets and capital).
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