By  on January 26, 2005

NEW YORK — Coach is out to maintain speed.

The American luxury brand on Tuesday reported a 40.5 percent jump in second-quarter earnings, a 46.5 percent leap in first-half profits, it raised its fiscal 2005 guidance and authorized a 2-for-1 stock split. It also outlined ways it plans to keep up its growth. They include:

  • Continued acceleration in the opening of U.S. stores, with the goal of having 300 American units within four or five years.

  • Adding more units in Japan, including 10 this year.

  • Specific store events such as trunk shows and special programs for its most loyal customers.

  • A possible buyout of its Japanese  partner, Sumitomo, with the first increased stake coming at the end of fiscal year 2007 and again at the end of fiscal year 2010.

  • Increasing the number of higher-priced, limited-edition items to appeal to more luxury consumers.

The upscale handbag and accessories powerhouse said for the three months ended Jan. 1, earnings grew to $134.1 million, or 69 cents a share, from $95.4 million, or 50 cents, in the same year-ago quarter. Coach beat consensus estimates of Wall Street analysts polled by Thomson First Call by one penny.

On Jan. 12, Coach had raised its quarterly profit guidance to at least 67 cents from earlier estimates of at least 64 cents.

For the quarter, gross profits jumped 32 percent to $403 million from $350 million last year, while gross margin expanded by 160 basis points to 75.8 percent from 74.2 percent due to shifts in product and channel mix. Selling, general and administrative expenses as a percentage of sales declined by 33.8 percent, representing a 130 basis-point decrease from 35.1 percent in the year-ago quarter.

“Based on the vibrancy and strength of the Coach brand and the growing U.S. premium-accessories category, we’ve never felt more positive than we do today about our prospects for future organic growth,” said Lew Frankfort, Coach’s chairman and chief executive officer, during a conference call to Wall Street analysts. He added that the firm’s “diversified business model, multiple product platforms, monthly product notice and consumer-centric orientation help us mitigate risk.”

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