US: Coach Q3 income dragged down by charges
Luxury handbag maker Coach Inc has posted net income of US$115m for the third quarter, down 29% compared with $162m in the prior year period, including charges related to cost reduction measures.
The company reported sales of $740m for the third quarter, compared with $745m in the same period of the prior year - a decrease of 1%.
During the quarter the company also recorded three one-time charges. These consisted of expenses related to the reduction of corporate staffing levels in the US, the closure of four North American retail stores and the closure of the company's sample-making facility in Italy.
In aggregate, these actions increased the company's SG&A expenses by $13m in the period and negatively impacted earnings by $8m after tax.
Lew Frankfort, chairman and CEO of Coach, said: "We were pleased to generate top line results that were essentially even with prior year and encouraged by the stabilisation of our comparable store sales to pre-Christmas levels in North America.
"Importantly, we enhanced the vibrancy of our franchise by providing our consumers with innovative, relevant product at a compelling value without going on sale in our retail stores. Our third quarter results demonstrate our resilience and ability to navigate through this challenging environment. In addition, the steps that we're taking to reduce our expense structure will help position Coach to enhance our profitability."
During the third quarter gross margin was 71.0% versus 75.0% a year ago, impacted as expected by deeper factory store promotions, channel mix and our sharper pricing initiative in full price.
For the nine months ended 28 March, net sales were $2.453bn, up 2% from the the first nine months of fiscal 2008, while net income for the nine months totalled $478m.
The company also announced that its board has voted to initiate a cash dividend at an annual rate of $0.30 per share, with the first quarterly payment, of $0.075 per share to be paid on 29 June to stockholders of record as of 8 June.
Frankfort added: "The announcement today of the initiation of a dividend reflects our financial strength and our confidence in Coach's business outlook. With a business model that generates significant cash flow and with virtually no debt, we are in a position to take advantage of profitable growth opportunities, while continuing to return capital to shareholders."
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