Growth for Coach China

New York design house Coach reports “notable strength” in Mainland China while reporting its second-quarter results for the quarter ended December 31.

Coach China sales were roughly even but increased 6 per cent on a constant currency basis when the impact of the strong US dollar was removed. In addition, there was a “significant” improvement in the quarter for Hong Kong and Macau.

“We are both pleased and proud of our performance this holiday season, particularly in light of the challenging and volatile global retail environment,” says CEO Victor Luis, noting that China represents “significant opportunities” for its brands.

“And, despite our deliberate pullback in the North America wholesale channel as well as currency headwinds, we delivered double-digit earnings growth in the quarter. ”

Second-quarter net sales totalled $1.32 billion for the second fiscal quarter, an increase of 4 per cent over the same period the previous year, including a benefit of 40 basis points related to currency translation.

Gross profit totalled $906 million, up 5 per cent. Gross margin for the quarter was 68.6 per cent compared to 67.4 per cent in the year-ago period, while net income for the quarter was $200 million.

Net sales for the Coach brand totalled $1.20 billion for the quarter, an increase of about 2 per cent. This included international sales of $440 million, up 3 per cent.

Continued strength

This growth was driven in part by positive comparable-store sales overall with continued strength in Mainland China.

In Japan, sales rose 9 per cent in dollar value, but eased 2 per cent in constant currency, impacted by a lower Chinese tourist spend.

Sales eased for the group’s other directly-run businesses in Asia.

Gross profit for the Coach brand rose 4 per cent to $830 million. Gross margin for the quarter was 69 per cent, including about 30 basis points of benefit from currency. This compared to 67.7 per cent for the quarter in the previous year.

Net sales for the group’s Stuart Weitzman brand reached $118 million for the quarter compared to $94 million in the same period the previous year. This 26 per cent improvement was driven by strong growth in the brand’s direct channels, and was positively impacted by a wholesale shipment timing shift from the first quarter.

Gross profit for Stuart Weitzman rose 26 per cent to $76 million, while gross margin was even at 64.3 per cent.