NEW YORK — Anyone looking for signs of weakness in the high-end segment is going to have to wait.
On Monday, Coach Inc. delivered stellar first-quarter results with profits soaring 53.5 percent on a 30.5 percent sales gain. And regarding the holiday shopping season, management at the company expects another good year.
"As most of you know, during the last several years, we have established a lane between the moderate segment and the old luxury accessory brands, which we termed ‘accessible luxury.' This positioning, coupled with our brand and business equities, is Coach's competitive advantage yielding staying power, more predictable results and increasing productivity," said Lew Frankfort, chairman and chief executive officer, on a conference call.
Frankfort said U.S. retail comps have been in the double digits for the first quarter in each of the last four fiscal years, and said on average, Coach's retail stores are "twice as productive as they were just four years ago."
For the three months ended Oct. 1, net income, including the impact of stock option expense, came in at $93.6 million, or 26 cents a diluted share, compared with $61 million, or 16 cents, in the same year-ago quarter. Wall Street analysts had the company pegged to earn 23 cents a share, according to Thomson Financial. Excluding the expense for stock options, net income was $100 million, or 26 cents, versus $68 million, or 17 cents, a year ago. Sales in the quarter climbed to $449 million from $344.1 million in the prior year.
Shares of Coach rose $1 to close at $32.25 in trading Tuesday on the New York Stock Exchange, with 4.7 million shares trading hands compared with an average three-month trading volume of nearly 2.7 million shares. On Monday, shares of Coach fell to $31.25 on a trading volume of nearly 5.2 million shares, compared with Friday's close of $32.26. The sell-off followed a research note Monday from Merrill Lynch expressing caution, in part, over possibly less traffic at the outlet centers due to higher energy costs.
After posting results, Coach provided second-quarter guidance, projecting earnings per share of at least 45 cents on sales of $645 million, excluding the 2 cent-per-share cost for option expensing. For the full fiscal-year 2006, the company expects sales in the $2.1 billion range, up 23 percent from last year, and diluted earnings per share of $1.28 before option expense. Analysts are forecasting earnings per share at $1.26. Including option expense, the company expects EPS of at least $1.18 for the year.
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