Coach stock, Coach China

It's OK, Coach (NYSE:TPR) investors: You can exhale now. This morning, shares of the iconic luxury brand rose 5% after Coach beat Wall Street's quarterly expectations for both its top and bottom lines for the first time in over a year.

The good
Coach's fiscal fourth-quarter revenue decreased 7% year over year to $1.14 billion, which translated to adjusted earnings of $0.59 per share. That might not sound impressive, but analysts were only looking for earnings of $0.53 per share on sales of $1.09 billion.

Perhaps most notably, Coach's China segment shone once again, with total quarterly revenue increasing 20% from the same period a year ago, bolstered by double-digit growth in comparable-store sales. For Coach's full fiscal year, China revenue jumped more than 25% to $545 million.

In addition, Coach's men's business continued to perform well. Full fiscal-year men's sales grew roughly 20% to $700 million, which was in line with Coach's long-standing target despite increasingly fierce competition in the space.

The bad
That's also not to say Coach's report was all good. Total North American sales remained weak, decreasing 16% for the quarter to $691 million. Coach CEO Victor Luis acknowledged Coach's fall from grace on the continent, stating in the press release, "The fourth quarter capped a challenging year for the company, most notably in the North America women's bag and accessory business."

And it's not as though every luxury brand is struggling here. Rather, Coach has lost significant market share in its bread-and-butter continent to competitors such as Michael Kors, which only yesterday reported impressive 30% quarterly growth in North American sales to $718.9 million.

The hopeful
But don't for a second think Coach is sitting on its hands as it falls into stylish obsolescence. Luis also elaborated, "While the competitive landscape has shifted, we're keenly aware of the evolving market context and have a clear vision on how to address our challenges."

So what does that mean?

First, Coach is in the middle of a costly -- and necessary -- business transformation, which primarily involves updating its global fleet of stores, realigning inventory, closing roughly 70 underperforming North American retail locations, and implementing various other operational efficiencies. Coach recorded charges of $132 million for this transformation in the last quarter alone, which negatively affected net income by about $88 million, or $0.31 per share. And based on Coach's most recent estimates for these expenses, investors should expect the company in fiscal 2015 to record additional charges of between $48 million and $88 million.

However, Coach expects to capture roughly $70 million in savings related to its transformation initiatives in fiscal 2015, along with roughly $150 million in ongoing annual savings beginning in fiscal 2016.

What's more, Coach is looking forward to the fall arrival in retail stores of the inaugural collection from its new creative director, Stuart Vevers. This collection has received high praise from fashion industry critics since its debut at New York Fashion Week in February, and is widely expected to play a key role in Coach's multiyear turnaround.

Coach creative director Stuart Vevers' inaugural collection hits stores this fall. Photo source: Coach.

My (fashionably) Foolish takeaway
Investors should be ever grateful for Coach's current outperformance in both China and its men's segment, which have collectively propped up the iconic brand's financial results as its core North American women's business faltered.

But as an investor, there's plenty more to like about Coach right now, including the ongoing cost savings related to its transformation, the impending arrival of a fresh creative collection, and, frankly, a stock that looks cheap trading around 11 times trailing-12-month earnings and a forward annual dividend yield of 3.9%. As a result, I'm convinced Coach is still well positioned to continue rewarding patient, long-term investors.