Coach Profits Leap 41.4% as Brand Plans 100 More U.S. Stores

NEW YORK — The brand may be "Coach," but to judge from its earnings and forecast, it definitely flew first class in the second quarter.Coach...

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NEW YORK — The brand may be "Coach," but to judge from its earnings and forecast, it definitely flew first class in the second quarter.

Coach Inc., self-described marketers of "American accessible luxury" leather accessories, said Wednesday a solid holiday performance drove its quarterly profit and sales higher than expectations, prompting it to raise its forecast for the full year as the ongoing clamor for its handbags here and in Japan offset weak market conditions.

The New York-based company said that in the second quarter ended Dec. 28, profits rose 41.4 percent to $62.4 million, or 68 cents a diluted share, beating previously raised consensus estimates of 66 cents. Last year, Coach reported earnings of $44.2 million, or 49 cents. Sales shot up 30.9 percent to $308.5 million from the year-ago mark of $235.8 million.

The better-than-expected profit drove Coach’s shares up $3.31, or 11.4 percent, to close at $32.48 in New York Stock Exchange trading Wednesday. In the past 12 months, Coach’s shares have traded as high as $35.70, reached Dec. 2, and as low as $17.19, reached July 24.

"What we are experiencing, during our renaissance, is a growing market share as we attract a growing number of new and stylish consumers to the franchise and maintain our strong classic consumer base," Coach chairman and chief executive Lew Frankfort said in a brief telephone interview. "No one else in accessories offers accessible luxury across multiple channels and different geographies."

Direct-to-consumer sales, which consist primarily of transactions at U.S. Coach stores, increased 19 percent to $191.5 million from $160.5 million last year, while comparable-store sales for the quarter rose 12.7 percent, with retail stores up 18.1 percent and factory store sales up 5.8 percent. Indirect sales — including Coach Japan, U.S. department stores, international wholesale operations and special markets — rose 56 percent to $117.1 million from $75.3 million in the same period last year.

On a morning conference call with analysts and investors, Frankfort said, "In U.S. retail, our 18 percent comp reflects increases in both traffic and higher conversion rate as we continue to attract a consumer more predisposed to purchase." In addition, he said Coach experienced significant increases in sales at U.S. department stores as point-of-sale sales rose about 25 percent in the quarter. He also said Coach had double-digit comp performance in Japan.
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