By  on August 3, 2005

NEW YORK — Coach Inc. sure knows how to deliver the goods.

The accessories powerhouse posted a 48.6 percent jump in fourth-quarter earnings on a 23.8 percent sales gain. And it expects the momentum to continue, projecting first-quarter profits will rise by at least 28 percent and that sales in fiscal 2006 will top $2 billion for the first time.

After five years as a public company, Coach has distribution in key channels and a store base of 275. But management of the handbag and accessories company said it's only partway there.

"Notwithstanding our performance, we believe we are not yet at the halfway point in our organic growth," said Lew Frankfort, Coach's chairman and chief executive officer, in a conference call with Wall Street analysts on Tuesday. "While our results have been dramatic, our U.S. market share in the last few years is up only modestly against extraordinary category growth in bags and accessories. During our planning horizon, we plan to continue to grow the top line by driving double-digit distribution increases and improved productivity with an increasing rate of profitability."

Contributing to Coach's strong fourth-quarter performance was a combination of a 30 percent gain at U.S. department and specialty stores, a 14 percent rise in full-price U.S. comparable-store sales for the year and the opening of 25 new stores. The comp-store gain was driven by an increase in the average transaction and more modest gains in traffic and conversion.

As a result, net income for the three-month period ended July 2 rose to $97.6 million, or 25 cents a diluted share, from $65.7 million, or 17 cents, in the same year-ago quarter, while sales reached $418.7 million from $338.1 million. The prior-year period included an extra week in the quarter. Per-share results have been adjusted to account for the company's 2-for-1 stock split in April.

For the year, income gained 48.5 percent to $388.7 million, or $1 a diluted share, from $261.7 million, or 68 cents, a year ago. Sales increased by 29.5 percent to $1.71 billion from $1.32 billion.

Coach said direct-to-consumer sales in the quarter rose 26 percent to $245 million, driven by comps and distribution growth. Comps rose 22 percent, with sales at retail stores gaining 13.6 percent and factory store sales rising 34.7 percent. Indirect sales rose 21 percent to $174 million, reflecting gains in sales through Coach Japan, U.S. department stores and international wholesale. Sales at Coach Japan rose 20 percent on a constant-currency basis.

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