Coach, Inc. (COH - Analyst Report) posted first-quarter fiscal 2015 earnings of 53 cents a share that came ahead of the Zacks Consensus Estimate of 45 cents on higher international sales. Moreover, net sales of this New York-based company, which came in at $1,038.8 million also surpassed the Zacks Consensus Estimate of $1,004 million.

Coach, Inc - Earnings Surprise | FindTheBest

However, what came as a drawback for this designer and marketer of fine accessories and gifts was that both top and bottom lines fell 9.7% and 31.2%, respectively, from the year-ago quarter. On a constant currency basis, sales decreased 9%. Management held sluggishness in North American business responsible for the year-over-year decline.

Including charges associated with transformation, Coach reported earnings of 43 cents a share, sharply down from 77 cents delivered in the prior-year quarter.

Behind the Headline

Total North American sales fell 19% to $634 million. Direct-to-consumer sales also decreased at an equivalent rate, while comparable-store sales dropped 24%. At POS, North American department stores sales fell at a mid-teens rate, whereas shipments into department stores saw a lesser decline.

International sales rose 4% to $381 million over the year-ago quarter. On a constant currency basis, International sales jumped approximately 6%. China business continued its strong performance as sales surged 10% with an increase in comparable-store sales.

International wholesale shipments and sales across POS rose. Sales in Japan fell 7% on a constant currency basis, whereas in dollar terms, sales dropped 12% from the year-ago quarter due to a soft yen.

Adjusted gross profit fell 13% to $719.4 million, whereas gross profit margin contracted 250 basis points to 69.3%. Adjusted operating income came in at $216.9 million, down 32.6% from the prior-year quarter, while operating margin fell 700 basis points to 20.9%.

Store Update

During the quarter, Coach opened 1 store in North America, thereby taking the count to 540. In Japan, total number of locations increased to 199 due to the opening of 1 store.

In China, the addition of 2 new locations during the quarter took the total to 155. Across Asia (Other), store count remained 97. Coach also acquired the remainder of the stake in the company's European joint venture, and opened 1 store, resulting in a total count of 28 stores.

Other Financial Details

Coach ended the quarter with cash, cash equivalents and short-term investments of $907.5 million, current debt of $170 million and shareholders' equity of $2,440.1 million.

Zacks Rank

Currently, Coach holds a Zacks Rank #3 (Hold). Better-ranked stocks in the retail sector include Hanesbrands Inc. (HBI - Analyst Report) with a Zacks Rank #1 (Strong Buy), as well as Gildan Activewear Inc. (GIL - Snapshot Report) and Lululemon Athletica Inc. (LULU - Analyst Report) with a Zacks Rank #2 (Buy).