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Regarding the move, Coach chairman and chief executive officer Lew Frankfort said, "The announcement today of the initiation of a dividend reflects our financial strength and our confidence in Coach's business outlook."
The New York-based company's third-quarter net income decreased to $114.86 million, or $0.36 per share, from $162.41 million, or $0.46 per share, last year. On an adjusted basis, net income for the quarter fell 24% to $123 million, or $0.38 per share, from $162 million, or $0.46 per share, a year ago.
On average, seventeen analysts polled by Thomson Reuters expected the company to post earnings of $0.37 per share. Analysts' estimates typically exclude one-time items.
Adjusted results exclude one-time charge of $0.026 per share related to the reduction of corporate staffing levels in the U.S., and the closure of four North American retail stores and the company's sample-making facility in Italy. In total, the measures increased selling, general and administrative expenses by $13 million. Consequently, earnings were negatively impacted by $8 million.
Gross profit for the quarter declined 6% to $525.06 million from $558.32 million in the previous year. Gross margin was 71.0% compared to 75.0% a year ago, reflecting the impact of deeper factory store promotions, channel mix and our sharper pricing initiative in full price.
Quarterly net sales edged down 1% to $739.94 million from $744.52 million in the prior-year quarter, but came in above analysts' estimate of $711.36 million.
On the basis of Coach's primary channels of distribution, direct-to-consumer sales grew 9% to $634 million from $582 million a year earlier. North America's comparable store sales for the quarter declined 4.2%.
In Japan, sales rose 1% on a constant-currency basis, with a 14% increase in dollar sales, reflecting a stronger yen. China sales remained robust, as retail sales continued to comp at a double-digit rate, the company added.
Indirect sales dropped 35% to $106 million from $162 million in the prior year, attributed primarily to reduced shipments into U.S. department stores.
Further, Coach announced that it repurchased and retired 3.6 million shares of its common stock during the third quarter at an average cost of $13.98, spending a total of $50 million. At the quarter-end, $710 million was available under the company's repurchase authorization, Coach noted.
For the nine-month period, net income dropped to $477.58 million, or $1.46 per share, from $569.53 million, or $1.56 per share last year. Adjusted net income was $486 million, or $1.49 per share, down 15% from $570 million, or $1.56 per share, in the year-ago period.
Net sales for the period was $2.45 billion, up 2% from $2.40 billion a year earlier.
Additionally, the company said it has voted to initiate a cash dividend, at an annual rate of $0.30 per share. The first quarterly payment of $0.075 per share is payable on June 29 to stockholders of record as of June 8.
Looking forward, the company now expects over $50 million in total pre-tax savings next fiscal year. This is attributed to cost reduction measures together with those already implemented namely the elimination of merit-based salary increases and a hiring freeze outside of critical growth areas.
COH is currently trading at $20.92, up 14.76%, on the NYSE.
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