NEW YORK — Strong full-price sales in its two largest markets, the U.S. and Japan, launched Coach Inc.’s profits up nearly 80 percent in the first quarter.
Running counter to many high-end apparel and accessories firms, Coach boosted its financial projections for the current second quarter and for the full year.
The New York-based firm also announced that Dave DeMattei, president of the North American retail and wholesale division, has decided to resign at the end of January to start his own retail consulting business. DeMattei joined Coach in July 1998, spearheading the transformation of U.S. Coach stores to a more modern and inviting format.
A successor will be named later, the company said.
For the first quarter ended Sept. 28, Coach reported net income of $22.5 million, or 24 cents per diluted share, a 79.3 percent increase over income of $12.5 million, or 14 cents, in the year-ago period. Handbags and women’s small leather goods drove sales 27.9 percent higher to $192.8 million from $150.7 million. These results were ahead of its own and analysts’ recently raised guidance of 21 cents.
"It is enormously gratifying to be speaking with you today about our very strong third fiscal quarter 2003 performance, which reflects the vibrancy of the Coach brand, well received transitional and fall product offering and our proven growth strategy across all major distribution channels and key geographies," Lew Frankfort, chairman and chief executive of Coach, said to investors on a morning conference call.
By division, direct-to-consumer sales, which consist primarily of sales at U.S. Coach stores, rose 24 percent to $106.6 million from $86.2 million. Comparable-store sales rose 13.2 percent, with its 144 retail stores up 20.9 percent and its 76 factory stores up 7.5 percent. U.S. retail comp sales reflect a rise in traffic, which accelerated throughout the quarter, and higher conversion rates.
Indirect sales increased 34 percent to $86.2 million from $64.5 million in the same period last year. Results were driven by strong gains in U.S. wholesale and international divisions. Sales growth in the international division was due to double-digit comp-store sales gains and the complete ownership of its distribution in Japan as well as new stores in that market.Coach has consistently credited innovation and product diversity for its recent successes. In September, Coach introduced the Ergo handbag collection, which was well received. And for the holiday, it will roll out the Slim Duffle handbag group, which is already generating strong results. In addition, category expansions like footwear and hats are performing well.
Looking to the current second quarter, Frankfort said he is "confident the momentum which has continued this month, driven by the brand’s vibrancy, proven growth strategy, strong product offering and our loyal customer base, will ensure superior financial results for the holiday season."
The company now estimates second-quarter earnings of about 61 cents a share on sales of $290 million and full-year EPS of at least $1.27 on sales of at least $865 million. Currently, analysts are expecting Coach to report earnings of 59 cents and $1.21, respectively.
Coach stock closed down 2 cents to $29.40 in New York Stock Exchange trading Tuesday, but established a new 52-week high of $30.69 in intraday trading.
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