Coach, Inc. (COH) has reported a 17.40 percent rise in profit for the quarter ended Dec. 31, 2016. The company has earned $199.70 million, or $0.71 a share in the quarter, compared with $170.10 million, or $0.61 a share for the same period last year. On the other hand, adjusted net income for the quarter stood at $211.20 million, or $0.75 a share compared with $188.40 million or $0.68 a share, a year ago.
Revenue during the quarter grew 3.76 percent to $1,321.70 million from $1,273.80 million in the previous year period. Gross margin for the quarter expanded 112 basis points over the previous year period to 68.56 percent. Total expenses were 79.01 percent of quarterly revenues, down from 79.51 percent for the same period last year. This has led to an improvement of 50 basis points in operating margin to 20.99 percent.
Operating income for the quarter was $277.40 million, compared with $261 million in the previous year period.
However, the adjusted operating income for the quarter stood at $294.30 million compared to $285 million in the prior year period. At the same time, adjusted operating margin contracted 11 basis points in the quarter to 22.27 percent from 22.37 percent in the last year period.
Victor Luis, Chief Executive Officer of Coach, Inc., said, "We are both pleased and proud of our performance this holiday season, particularly in light of the challenging and volatile global retail environment. Our team delivered top-line growth in each of our reportable segments, highlighted by positive comparable store sales in North America and overall gross margin expansion. We continued to grow our business internationally, with notable strength in Europe and Mainland China, which represent significant opportunities for our brands. Importantly, we opened key global flagship locations on Fifth Avenue in New York City and Regent Street in London, which embody our modern luxury vision and celebrate our heritage and 75-year history of craftsmanship. And, despite our deliberate pullback in the North America wholesale channel and currency headwinds, we delivered double-digit earnings growth in the quarter."
For financial year 2017, the company forecasts operating income to grow in the range of 18.50 percent to 19 percent.
Working capital increases sharply
Coach, Inc. has recorded an increase in the working capital over the last year. It stood at $2,050.50 million as at Dec. 31, 2016, up 28.35 percent or $452.90 million from $1,597.60 million on Dec. 26, 2015. Current ratio was at 3.87 as on Dec. 31, 2016, up from 3.27 on Dec. 26, 2015.
Cash conversion cycle (CCC) has decreased to 28 days for the quarter from 91 days for the last year period. Days sales outstanding went down to 18 days for the quarter compared with 20 days for the same period last year.
Days inventory outstanding has decreased to 51 days for the quarter compared with 111 days for the previous year period. At the same time, days payable outstanding was almost stable at 40 days for the quarter, when compared with the previous year period.
Debt comes down significantly
Coach, Inc. has recorded a decline in total debt over the last one year. It stood at $591.60 million as on Dec. 31, 2016, down 33.30 percent or $295.40 million from $887 million on Dec. 26, 2015. Total debt was 12.64 percent of total assets as on Dec. 31, 2016, compared with 19.27 percent on Dec. 26, 2015. Debt to equity ratio was at 0.21 as on Dec. 31, 2016, down from 0.35 as on Dec. 26, 2015.
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