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Basch Report
Jax Daily Record Thursday, Aug. 25, 202203:00 AM EST

Coach says it's gaining millions of new handbag customers

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The company distributes products to all of North America from Jacksonville.
by: Mark Basch Contributing Writer

While inflation is affecting consumer behavior at many stores, high-end retailer Coach is gaining new customers for its handbags and accessories.

As it reported fiscal year-end earnings Aug. 18, parent company Tapestry Inc. reported a big increase in North American customers, particularly for its Coach brand.

The New York-based company handles all North American distribution for Coach products from its facility at Jacksonville International Tradeport near Jacksonville International Airport.

“We acquired 15 million new customers in North America alone over the last 24 months, including approximately 7.7 million new customers in fiscal ‘22,” said CEO Joanne Crevoiserat in Tapestry’s conference call with analysts.

“Importantly, we have seen these new customers transact at higher AURs and they have returned to the brands with higher frequency,” she said. Average unit retail (AUR) is the average selling price for an item.

“At the same time, we have increased retention rates and continued to reactivate lapsed customers across brands, all of which has led to more active customers engaging with our brands at higher average spend,” Crevoiserat said.

Coach is by far Tapestry’s biggest business but it also owns the Kate Spade and Stuart Weitzman brands.

Analysts said Tapestry’s results show higher income consumers still are willing to spend in the current economy, but they also credited Tapestry’s performance.

“Years of work to drive engagement with North American consumers are clearly working,” Credit Suisse analyst Michael Binetti said in a research note.

“In the context of what we are seeing across retail more broadly, we think Tapestry’s execution and FY23 guidance stands out as better than peers,” Morgan Stanley analyst Kimberly Greenberger said in a note.

Tapestry reported sales rose 16% in the fiscal year ended July 2 to $6.68 billion, with adjusted earnings rising by 59 cents a share to $3.47.

Coach brand sales rose an adjusted 18% to $4.92 billion and Crevoiserat said the sales were 15% higher than pre-pandemic fiscal 2019 sales, with the brand gaining 4 million new North American customers.

“Our success over this past fiscal year highlighted by a significant acceleration in sales at strong margins underscores our confidence in the brand and its meaningful opportunity for long-term sustainable growth,” she said.

According to Tapestry’s annual report, the company’s 1.05 million-square-foot Coach distribution center in Jacksonville is by far its biggest facility.

Tapestry also has fulfillment centers in Japan and China and a Kate Spade distribution center in Ohio.

Tapestry is forecasting more modest growth in fiscal 2023, with revenue projected at about $6.9 billion and earnings of $3.80 to $3.90 per share.

“While we see some risks with the F2023 outlook, which assumes North America can stay resilient in a broader consumer slowdown, the company is playing from a position of strength and management has proven it can be nimble.” Baird analyst Mark R. Altschwager said in a research note.

Home Depot Pro sales increase

The Home Depot Inc. reported higher second-quarter sales, with strong demand from its core do-it-yourself homeowner customer.

However, its professional contractor division, which grew from a Jacksonville business Home Depot acquired, is outpacing the do-it-yourself business.

The Atlanta-based chain of home improvement stores created the contractor division called Home Depot Pro in 2018, after its acquired Jacksonville-based Interline Brands in 2015.

Interline marketed products for maintenance, repair and operations professionals.

Home Depot reported total sales for the second quarter ended July 31 rose 6.5% to $43.8 billion and sales at stores open for more than one year rose 5.8%.

The company does not break out sales data for the contractor business. But in its Aug. 16 conference call, Executive Vice President of Merchandising Jeff Kinnaird said sales growth was higher in the Pro division.

Ted Decker

“We’re encouraged by the continued momentum we are seeing with our Pros and they tell us their backlogs remain healthy,” Kinnaird said, according to a transcript of the call posted by the company.

“During the quarter, we saw robust project demand across the business. This can be seen in the double-digit comp performance of our building materials, plumbing, and millwork departments, as well as in certain project related categories like fencing, siding, conduit boxes and fittings, tubs and showers, and countertops,” he said.

While the company won’t give specific numbers on how big its Pro business is, CEO Ted Decker reiterated previous projections by the company that they see a potential $450 billion annual market for that segment.

“We just see tremendous opportunity. And I would say yes, that is a category that we are outperforming and happy for it,” Decker said in the conference call.

Home Depot reported earnings of $5.05 a share, up from $4.53 in the second quarter of 2021.

Black Knight sets Sept. 21 shareholder vote

Black Knight Inc. scheduled a special meeting for Sept. 21 for shareholders to vote on its proposed buyout by Intercontinental Exchange Inc.

ICE agreed to buy each share of the Jacksonville-based mortgage technology May 4 for a price equal to $68 plus 0.144 times ICE’s market price.

At the time of the agreement, that made the value of the deal $85.04 per Black Knight share. 

Black Knight’s Aug. 19 proxy statement for the special meeting put the price at $83.09 a share, based on ICE’s recent stock price. That’s well above Black Knight’s closing price of $67.26 on Aug. 19.

Even if the deal is approved at the September meeting, the merger is not expected to be completed until the first half of 2023 because of an extensive antitrust review by the U.S. Justice Department.

ICE is best known for its operation of the New York Stock Exchange but it also has a large mortgage technology business, and analysts have said regulators are concerned about the company gaining too much of the U.S. mortgage technology market in the merger.

Black Knight’s proxy said the shareholders meeting will be held virtually by remote communication.

Fidelity expands title business

Fidelity National Financial Inc. announced Aug. 16 it acquired AllFirst Title Insurance Agency, which expands Fidelity’s title business in Texas, Oklahoma, New Mexico and Arkansas.

Jacksonville-based Fidelity is the largest U.S. title insurance company and has a history of expanding with acquisitions of smaller regional companies.

Fidelity did not announce financial terms of the AllFirst deal.

Tulsa-based AllFirst will continue to operate and serve its customers through its various brand names.

GEE Group benefits from staffing demand

GEE Group Inc. reported higher revenue for its third quarter ended June 30 as the post-coronavirus recovery increases demand for its staffing services.

Revenue in the quarter rose 8% to $41.1 million and the company reported adjusted earnings of $3.1 million, or 3 cents a share, reversing a loss last year.

Jacksonville-based GEE Group said growth in its direct hire business was higher than its contract staffing services.

It said shortages of workers for highly skilled positions and the trend to more remote workers, which creates security concerns, is driving demand for direct hires.

This was GEE Group’s fourth straight quarterly profit since it reduced debt last year.

“Having consistently achieved profitable growth, and higher margins, earnings and free cash flow for the last four quarters, we now have a positive track record, as well as positive momentum for the future,” CEO Derek Dewan said in an Aug. 16 conference call, according to a company transcript.

Duos reports ‘order of magnitude’ improvement

The pandemic slowed down growth plans for Jacksonville-based Duos Technologies Group Inc., which provides technology solutions for railroads and other industries, but business is improving this year.

The company reported second-quarter revenue of $3.62 million, up from $649,000 a year earlier.

Chuck Ferry

“Our financial performance in Q2 represented an order of magnitude improvement over our results in recent reporting periods,” CEO Chuck Ferry said in an Aug. 15 conference call, according to a company transcript.

“I am pleased to report that our Q2 results are the third quarter in a row where we have met or exceeded our internal financial metrics,” he said.

“Additionally, Q2 represents the highest single quarter recurring revenues in the company’s history. We will continue to emphasize growing that portion of the revenue at a greater rate going into next year.”

Duos projects total 2022 revenue of $16.5 million to $18 million, about double its 2021 revenue.

However, economic conditions could impact the projections.

“While supply chain issues have started to show some signs of improvement, time between contract award and full revenue recognition remains longer than was the norm in prior years,” Chief Financial Officer Adrian Goldfarb said in the conference call.

“At this time, we still expect to see higher revenues later this fiscal year and into 2023,” he said.

Duos had a net loss of $1.34 million in the second quarter.

SG Blocks means ‘safe and green’

As SG Blocks Inc. reported its second quarter results, CEO Paul Galvin explained the meaning of the company’s name.

“The ‘S’ and the ‘G’ in our name stands for safe and green,” Galvin said in an Aug. 15 conference call.

SG Blocks is a modular building company that converts shipping containers for structures.

The company moved its headquarters to Jacksonville this year.

SG Blocks says taking those large containers that otherwise would go to waste is good for the environment, and it hopes profitable for the company.

Revenue jumped from $8.8 million in 2020 to $38.5 million last year, but business has been slower this year.

Second-quarter revenue of $7.6 million was lower than the $11.9 million in revenue in the 2021 second quarter.

SG Box reported a net loss of $1 million, or 11 cents a share, in the quarter.

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