Coach, Inc. reported un-audited consolidated earnings results for the second quarter and six months ended December 26, 2015. For the quarter, the company reported net sales of $1,273.8 million compared with $1,219.4 million reported in the same period of the prior year. Operating income was $261 million against $275.4 million a year ago. Income before provision for income taxes was $254.7 million against $275.8 million a year ago. Net income was $170.1 million or $0.61 per diluted share against $183.5 million or $0.66 per diluted share a year ago. On non-GAAP basis, operating income was $285 million, income before provision for income taxes was $278.7 million, net income was $188.4 million or $0.68 per diluted share against operating income was $299 million, income before provision for income taxes was $299.4 million, net income was $200.2 million or $0.72 per diluted share a year ago. Net cash from operating activities in the second quarter was $302 million compared to $445 million last year in second quarter. Free cash flow in the quarter was an inflow of $196 million versus $406 million in the same period last year. CapEx spending was $106 million versus $39 million in the same quarter a year ago.

For the six months, the company reported net sales of $2,304.1 million compared with $2,258.2 million reported in the same period of the prior year. Operating income was $402.4 million against $455.2 million a year ago. Income before provision for income taxes was $389.4 million against $456.3 million a year ago. Net income was $266.5 million or $0.96 per diluted share against $302.6 million or $1.09 per diluted share a year ago. On non-GAAP basis, operating income was $450 million, income before provision for income taxes was $437 million, net income was $301.5 million or $1.08 per diluted share against operating income was $515.9 million, income before provision for income taxes was $517 million, net income was $346 million or $1.25 per diluted share a year ago. Net cash provided by operating activities was $310 million compared to $583.6 million a year ago. Purchases of property and equipment were $175.5 million compared to $79.6 million a year ago. Net income decreased in the first six months of fiscal 2016 as compared to the first six months of fiscal 2015, primarily due to a decrease in operating income of $52.8 million and the impact of increased interest expense attributable to debt, partially offset by a $30.8 million decrease in provision for income taxes. Net income per diluted share decreased primarily due to lower net income as well as the impact of higher weighted-average diluted shares. Excluding charges under Transformation Plan and acquisition charges in the first six months of fiscal 2016 and fiscal 2015, net income and net income per diluted share decreased 12.8% and 13.4%, respectively.

Coach brand revenues for Fiscal 2016 are still expected to increase by low-single digits in constant currency on a 52-week basis. However, based on current exchange rates, foreign currency is now expected to negatively impact overall Fiscal 2016 revenue growth by 225-250 basis points. Coach brand operating margin for Fiscal 2016 is still estimated to be in the mid-to-high teens with some shift between the gross margin and expense ratio from previous annual guidance. To this end, gross margin for the Coach brand is projected to be in the range of last year's margin of about 69½% on a constant currency basis, while negative foreign currency effects are now projected to impact gross margin by 90-100 basis points. Interest expense is expected to be in the area of $30 million - $35 million for the year while the full year Fiscal 2016 tax rate is projected at about 28%. In addition, based on Stuart Weitzman's sales and margin outperformance during the holiday quarter, the company is now forecasting revenue for the brand to be in the area of $340 million on a reported dollar basis for fiscal 2016, driving Coach, Inc. total revenue growth to high-single digits on a constant currency basis and adding about $0.12 to earnings per diluted share, excluding charges associated with financing, short-term purchase accounting adjustments and contingent payments, and integration costs. Overall, the Stuart Weitzman business is now projected to negatively impact consolidated gross margin and operating margin by about 70 basis points and approximately 20 basis points, respectively – an improvement from previous guidance. Therefore, taken together with its projection for the Coach brand, the company is raising its operating income outlook for Coach, Inc. for Fiscal 2016. The company also notes that fiscal 2016 will include a 53rd week in its fourth quarter, which is expected to contribute approximately $75 million - $80 million in incremental revenue and $0.06 in earnings per diluted share to Coach, Inc. The company expects CapEx for fiscal year 2016 to be in the area of $300 million, excluding the capital costs associated with the new headquarters, which are expected to be approximately $185 million in fiscal year 2016.