NEW YORK — It appears Santa delivered lots of Coach bags and may have even had one slung on the back of his sleigh.
Reflecting impressive holiday sales, the New York-based maker of American classic accessories said Wednesday it was boosting its second-quarter earnings guidance to at least 48 cents a diluted share, above its previous guidance of 44 cents and exceeding current consensus estimate of 46 cents. Last year, Coach reported earnings of 34 cents.
Coach also said same-store sales for the second quarter ended Dec. 27 strengthened 13.6 percent, with retail stores up 16.4 percent and factory store sales up 9.4 percent. Overall sales for the quarter increased 33.2 percent to a better-than-expected $411 million from $308.5 million in the like period last year
Coach is expected to report earnings for the second quarter on Jan. 21.
“Our robust holiday sales reflect the power of the Coach brand and the strength of our product offering across all distribution channels and key categories,” Lew Frankfort, Coach’s chairman and chief executive, said in a statement.
He said the profit gains stem from both gross margin expansion and the further leveraging of its expense base.
Coach seems poised to beat the post-holiday doldrums as the strong business trends continue in January. “Consumers are responding enthusiastically to our new spring offering during what is traditionally, for most other retailers, a highly promotional post-holiday period,” Frankfort noted.
In the quarter, direct-to-consumer sales rose 23.8 percent to $237 million from $191.5 million, while indirect sales grew 48.6 percent to $174 million from $117.1 million.
Robert Drbul, an analyst with Lehman Brothers, said in a research note, “Coach experienced a very impressive holiday selling season across all channels, reflecting strong demand in virtually all product categories.” He said sales were led by handbags and women’s accessories, particularly Duffle handbags, Signature products and women’s outerwear. Individual products that sold particularly well included the patchwork Gallery tote, the patent Gallery tote, the leather flap satchel and the children’s backpack.
The analyst raised his quarterly earnings per share guidance to 49 cents from 45 cents as well as those for the fiscal years 2004 and 2005 to $1.15 and $1.35, respectively.Coach said Japanese business continues to be solid, posting double-digit comp gains. Frankfort said given the Japanese consumer’s sustained demand for luxury accessories and the growing appeal of the Coach brand, “we’re well positioned for further rapid market share gains in Japan.”
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