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Coach Raises 2Q Guidance On Japan, U.S. Sales Gains

NEW YORK — Demand for Coach Inc.’s on-trend leather accessories fed holiday sales and is contributing to the company’s optimistic outlook on spring. <BR><BR>Citing a 27 percent rise in U.S. sales and a 35 percent sales jump in Japan,...

NEW YORK — Demand for Coach Inc.’s on-trend leather accessories fed holiday sales and is contributing to the company’s optimistic outlook on spring.

Citing a 27 percent rise in U.S. sales and a 35 percent sales jump in Japan, the luxury handbag retailer Wednesday lifted its fiscal, second-quarter sales and earnings projections to above analysts’ consensus.

The New York-based company now sees earnings in the quarter ended Jan. 1 of at least 67 cents a share versus a prior forecast of 64 cents. The Wall Street consensus is 66 cents.

Total sales in the quarter were $532 million, up 29.1 percent from $412 million in the prior year. That compares with previous guidance of $505 million, and analysts’ forecast for $515.4 million.

Coach’s complete results for the holiday quarter will be released on Jan. 25.

“Our performance speaks to the vitality of the brand, as we continue to grow market share in a rapidly expanding U.S. premium accessories category,” said Lew Frankfort, chairman and chief executive officer of Coach, in a statement. The company also cited improved gross margins and expense management for the profit guidance increase.

Direct-to-consumer sales in the second quarter came in at $307 million, up 29.5 percent from $237 million last year. Indirect sales were up 29.3 percent to $225 million, for which the company cited strong sales in Japan, U.S. department stores and international wholesale.

Same-store sales in the U.S. jumped 16.5 percent. Retail store sales rose 13.9 percent, while factory store sales gained 20.7 percent.

“Coach is benefiting from its status brand positioning while at the same time being accessible in its price points for the handbag and small leather goods category with little competition,” wrote Piper Jaffray analyst Neely Tamminga in a Wednesday report.

Coach noted in its statement that U.S. comparable retail stores are 55 percent more productive than they were three years ago.

In Japan, along with the 35 percent increase in sales in constant currencies, same-store sales increased in the high-single digits. That was despite what Frankfort called “lackluster category sales.”

“Our results underscore the success of our distribution strategy in Japan, notably the acceleration of flagship openings and the expansions of existing shops,” Frankfort said.