Shares of Coach Inc. rose almost 12 percent Tuesday after its first-quarter profits increased 34.1 percent on a sales gain of 19.7 percent, led by a spike in shipments to U.S. department stores and overseas.
The company is moving ahead with ambitious plans for China and is also beginning to reap some success from its men’s business, which is expected to account for a greater share of overseas volume, Lew Frankfort, chairman and chief executive officer, told WWD.
For the three months, income was $188.9 million, or 63 cents a diluted share, comfortably above the 55 cents expected by analysts, on average, and the $140.8 million, or 44 cents, tallied in last year’s quarter.
Sales rose to $911.7 million from $761.4 million. The quarter was boosted by a 27 percent jump to $136 million for shipments to U.S. department stores and the international wholesale channel. Direct-to-consumer sales increased 19 percent to $775 million, while North American comparable-store sales rose 8.5 percent.
Frankfort said on a morning conference call, “All of our business units posted strong performances, despite muted consumer spending, as the merchandising, marketing and pricing strategies we put into place in fiscal year 2010 continued to drive growth.”
The ceo said the company was “pleased with the current trends we’re experiencing in the business and are well positioned for the upcoming holiday season.”
Frankfort said China was Coach’s fastest growing business.
He told WWD the New York-based firm, which opened eight stores in the quarter in Mainland China, will open seven in the second quarter. The company plans to open a total of 25 on the mainland during fiscal year 2011. Coach currently operates 49 Mainland China locations.
The company plans to open a total of seven stores in Japan for the year, and has already opened its first men’s factory store there. Included in the seven are two full-price men’s freestanding stores.
He said the company’s men’s initiative “is taking hold nicely, and we are enjoying strong successes wherever we are offering a comprehensive men’s assortment. In our Japan flagship location, men’s is now 30 percent of the total sales for that store.”
He said men’s now represents 3 percent to 4 percent of Coach’s global sales. He said the men’s business has the potential to be 20 percent to 25 percent of the total Asian and European businesses, while in the U.S. it has the potential to be as much as 15 percent of total domestic sales.
Even though prices overall are higher in China and Japan than in the U.S. to reflect duty and other administrative costs, the female consumer, particularly in China, is prepared to “spend a week’s salary” on a handbag, and prefers the brand’s “leather offerings,” Frankfort said. The company did not provide second-quarter guidance. Shares of Coach, which reached a 52-week high of $50.75 in intraday trading, closed Tuesday at $49.78, up $5.30 or 11.9 percent.
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