Overall annual guidance has not changed
Key areas of interest:
- Guidance (still excludes Stuart W acquisition impact): Overall annual guidance has not changed - reaffirms FY15 sales low double digit decline, vs -12.5% to $4.20 bln estimate. Q4 sales will be down by similar levels in Q3 on both a constant currency and reported basis..... Also reaffirms FY15 gross margin of 69-70% and operating margin in high teens. Sees FY15 CapEx $275-300 mln. Plans to maintain dividend at current rate.
- Q3 color: Avg transactions rose and co saw relative sequential improvement in traffic despite weather. In handbags - the above $400 price bucket grew in penetration and saw another positive comp. Estimate overall women's handbags/accessories grow in MSD in Q4. Co continues to believe that the category will grow at ~7% compound annual growth rate.
- Global pricing strategy: Co plans to keep strategy at this time -- includes pricing that is 40-60% below prices of luxury brands.
- By Category: Stuart Weitzman acquisition should be completed in the weeks ahead. Co renewed current footwear licence for next two years (while still integrating StuartW)...As for new multi-year fragrance agreement, the first scent with new partner expected to launch fall 2015...
- By region: In China, co is still targeting FY15 China sales of ~$590-600 mln. Co reaffirmed FY15 European sales forecast of ~$90 mln.
- Store transformation update: Some opening/renovations have been pushed back -- will be very heavily back-weighted for full year. ~50 international renovations and 10 new international stores have moved into FY16--now targeting ~100 global renovations in FY15 (prior guidance was for ~150) and open ~40 -50 new stores globally (prior guidance was for 50-60) for total of 140 -150. In dept store, co still expects to convert over 300 locations to open sell format this fiscal year. Over the last few weeks, co completed several renovations - expect to have completed about 35 additional renovations by year end.