NEW YORK — Consumers may be less confident about the economy, but that didn’t stop them from spending their hard-earned cash at Coach.

The American luxury goods manufacturer on Tuesday reported an 87 percent spike in fourth-quarter income over the prior-year period, as well as a gross-margin increase of 400 basis points.

For the three months ended June 29, income was $17.3 million, or 19 cents a diluted share, compared with $9.2 million, or 10 cents, a year ago. Excluding a tax benefit from reorganization charges related to the closing of manufacturing facilities in Florida and Puerto Rico, in 2001 and 2002 respectively, income was up 80.3 percent to $16.6 million, or 18 cents, which was still a penny higher than the consensus estimates among analysts polled by Thomson Financial/First Call. Earnings-per-share numbers have been adjusted for the 2-for-1 split effective on July 3.

Sales in the quarter rose 29.6 percent to $171.4 million from $132.3 million. Gross margin in the period increased to 66.6 percent from 62.6 percent, driven by the consolidation of Coach Japan Inc., sourcing cost initiatives and modifications in its merchandise mix.

Direct to consumer sales, primarily at Coach Stores, rose 20 percent to $106.5 million from $88.6 million. New and expanded stores and a 9.5 percent increase in comparable-store sales produced a 14.8 percent rise in retail stores and 4.4 percent gain at factory stores.

Indirect sales via the wholesale channel jumped 49 percent to $64.9 million from $43.7 million. The firm posted strong gains in both the Japanese and U.S. wholesale businesses, and reported double-digit gains in comparable location sales. In fiscal 2002, international sales contributed nearly 20 percent of total revenues, up from 14 percent a year ago.

Highlights in the quarter included the opening of 20 new North American stores, the completion of the Coach Japan acquisition, the opening of the Ginza flagship in May, and the completion of a store renovation program begun in 1999.

Lew Frankfort, chairman and chief executive officer, said in a conference call to Wall Street analysts, "We are delighted with the strength of our U.S. full-priced businesses, which enjoyed increases in both traffic and conversions in our own stores and significant increases in sales in U.S. department stores."For the year, income was up 34 percent to $85.8 million, or 94 cents, from $64 million, or 76 cents. Excluding the tax benefit, income would have risen 31.4 percent to $88 million, or 97 cents, from $67 million, or 75 cents. Sales for the year increased 19.8 percent to $719.4 million from $600.5 million.

He added that although the new year has just begun, the momentum across all business channels has continued through July, and that Coach is confident of its outlook for fiscal 2003.

First-quarter fiscal sales are projected to rise 19 percent to at least $180 million, with earnings-per-share (EPS) of around 18 cents. For the year, sales are expected to increase between 12 to 15 percent to between $805 million to $830 million. The company’s guidance for EPS was pegged at between $1.13 and $1.15, along with gross-margin improvement by 100 basis points.

Robert Drbul, analyst at Lehman Brothers, wrote in a research note, "Given the company’s continued compelling performance, we have an even higher level of confidence in the company’s ability to achieve our new top-line estimate of $825 million for 2003 (14.7 percent growth). We believe that this revenue number is achievable without any major recovery in tourism, which could provide further upside to both revenue and earnings estimates."

Frankfort said during the conference call that same-store sales comparisons at typical tourist shopping districts such as in San Francisco and Manhattan were trending lower than at other store sites.

Sales, the chief executive said, continue to be driven by purchases in handbags and small leather goods, and by the introduction of categories such as footwear and hats.

Coach’s plans include doubling the number of U.S. retail stores over the next four to five years to at least 250. "This year we will add at least 20 new retail stores, of which we expect about 12 to open in time for the holiday season," Frankfort said. "Most of our new stores will be located in existing cluster markets, consistent with our expansion strategy."

During fiscal 2003, the company plans to expand its most productive locations, modernize its factory outlet stores and renovate between 30 to 35 shops in U.S. department stores situated in major metropolitan areas.Other growth vehicles on Coach’s agenda include the expansion of its most productive stores in the U.S. and the doubling of market share in Japan from the present 2 to 3 percent levels to at least 6 percent in the next few years.

For its holiday advertising campaign, Coach will again be going to the dogs. "We’ve had a lot of fun with Eddie, our Coach mascot. You will be seeing a version of Eddie, more than one Eddie," the ceo said.

The company is also working on a new men’s collection, which it will introduce in spring 2003. While the men’s accessories business is strong, it represents between 10 to 15 percent of sales.

In contrast, the Signature line, recently introduced, represented 36 percent of sales for the quarter and 30 percent of sales at the Coach stores. Frankfort expected those percentages to decline somewhat once the new leather groups are introduced. Signature is not sold at the factory stores, and the ceo said the company had "no intention" of moving the line to the outlets at all this year.

Coach shares closed off $1.20, or 4.9 percent, at $23.52 in New York Stock Exchange trading Tuesday.

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