Coach, the struggling American accessories brand that has been trying to regain its cachet in the luxury handbag market, reported its first growth in quarterly profit in three years. The brand also reported its second consecutive quarter of sales growth, spurred by demand in China, Japan and Europe.
The results show that Coach's efforts to reinvigorate its business are paying off after the brand lost its premium status due to an expansion spree that resulted in its brand becoming ubiquitous. "The better numbers add to the sense that the long promised recovery of the brand is starting to materialize," said Neil Saunders, chief executive of research firm Conlumino.
Sales in North America, the company's biggest market, rose 1 percent in the quarter. In China, another key market for the company, sales rose 2 percent on a constant currency basis. Comparable sales for the Coach brand in North America were flat in the third quarter ended March 26, ending three years of declines. Analysts had expected a drop of 1.4 percent, according to Consensus Metrix. Coach said it was on track to return to comparable store sales growth in North America in the fourth quarter. Total revenue rose 11.2 percent to $1.03 billion, beating average analyst estimate of $1.02 billion.
In its attempts to regain marketshare, the 75-year-old company has renovated stores, cut back on promotions and appointed well-known fashion designer Stuart Vevers as head of its creative team to win back market share from newer entrants such as Michael Kors Holdings Ltd and Kate Spade & Co. Coach also said it would cut an unspecified number of corporate jobs, including management positions, and take a pre-tax charge of about $65-$80 million in the fourth quarter.
More recent moves by the company see the ousting of Chief Operating Officer Gebhard Rainer and David Duplantis, president of global marketing, digital, and customer experience. According to a statement from the brand, Andre Cohen will become president of North America and global marketing, while Todd Kahn will become president, chief administrative officer, and secretary. The company also said it’s reducing global corporate staffing levels and improving its supply chain. Those moves will result in pretax charges of $65 million to $80 million.
(Reporting by Abhijith G and Yashaswini Swamynathan in Bengaluru; Editing by Saumyadeb Chakrabarty)