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Coach Still on a Roll:As Profits Leap 60%, Big Expansion Ahead

Coach’s first-quarter sales jumped 33 percent, earnings rose 60 percent, its store count is set to add 100 units and it will remodel its flagship.

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Coach’s Madison Satin Clutch.

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Lurex Signature Demi.

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NEW YORK — Coach is painting its accessible luxury on a broader canvas.

As the company reported a 60 percent leap in first-quarter earnings and a 33.2 percent rise in revenues, it said it was looking to add 100 stores over the next few years, remodel its New York flagship and introduce a higher-priced special collection for holiday retailing.

Summing up how the surge in luxury spending has benefited Coach Inc., Lew Frankfort, chief executive officer of the company, said in a conference call, “During the last several years, we established a lane between the moderate segment and the luxury accessory brands which we termed ‘accessible luxury.’”

He cited strong sales of handbags and women’s small leather goods in the quarter, adding that Coach’s U.S. branded women’s accessories business is still “experiencing an unprecedented level of growth this year.”

The company Tuesday also forecast both second-quarter and full-year earnings ahead of analysts’ estimates and detailed new store and holiday product expansion strategies. Plans include a 2,000-square-foot expansion of Coach’s flagship at 57th Street and Madison Avenue in New York, the addition of 100 U.S. retail stores in the next four to five years and the Nov. 1 launch of its first lifestyle evening collection at prices 20 to 30 percent higher than its core concepts.

In the three months ended Oct. 2, Coach earned $67.7 million, or 35 cents a share, versus $42.3 million, or 22 cents, in the year-ago period. Analysts had been calling for a profit of 33 cents in the latest quarter.

Net revenues increased 33.2 percent to $344.1 million, from $258.4 million in last year’s comparable quarter. By division, direct-to-consumer sales were $175 million, up 30.6 percent, and indirect sales rose 36.3 percent to $169 million. Sales in Japan increased 30 percent in constant currencies. Overall same-store sales rose 15.1 percent, with retail stores reporting a 16.8 percent increase and factory stores seeing a 13.5 percent rise.

Mike Tucci, president of Coach’s North American retail division, said strong sellers in the quarter were the company’s Soho Mini Signature leather and suede collection, Chelsea leather collection and Limited Edition pieces.
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