NEW YORK — Coach Inc. began its new fiscal year exactly as it ended its last one — with the momentum of a runaway train.

The New York-based leather goods company said Tuesday that first-quarter net income continued to skyrocket, gaining 88.3 percent to $42.3 million, or 22 cents a diluted share, 4 cents ahead of most recent company expectations as well as the Wall Street consensus estimate. That compares to the $22.5 million, or 12 cents, the company earned in the first quarter of 2002.

The ongoing velocity of its U.S. full-price business drove the 34 percent overall sales growth in the quarter ended Sept. 27 to $258.4 million over $192.8 million.

“Results continue to be driven by handbags and women’s small leather goods, reflecting the success of new introductions as well as category expansions, and the strength of ongoing collections,” Lew Frankfort, Coach’s chairman and chief executive, said on a morning conference call. “Our very strong performance 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 geographies.”

The strong performance allowed Coach, in intraday trading, to establish a new 52-week high of $34.20, shattering the old mark by $2.40. Shares ended the day’s New York Stock Exchange trading session at $33.87, up $2.43 or 7.7 percent.

Direct-to-consumer sales, dominated by revenues at U.S. Coach stores, rose 26.2 percent to $134.5 million during the quarter from $106.6 million in the comparable period last year. Comparable-store sales jumped 17.8 percent, with full-price stores up 29.2 percent and factory store sales up 7.6 percent.

Indirect sales rose 43.7 percent to $123.9 million from $86.2 million, attributable primarily to strong gains in Japan and other international markets. U.S. department store results were robust both at point-of-sale and in shipments while business-to-business results were also strong. In Japan, Coach continued to experience double-digit comp gains.

“Our confidence stems from the continuing strength of our business, our market share gains and from the vitality of our key drivers of our growth,” Frankfort said. “This fall we continued to experience strong traffic increases in our retail stores and enjoy the benefits of a 5 percent higher average transaction size as consumers embrace our exclusive products and a more sophisticated product at higher price points throughout our full-price assortment.”Eric Beder, an analyst with Northeast Securities, said, “It was an outstanding quarter by any stretch of the imagination. If you look at what’s working, Coach is in luxury goods, fashion-right [merchandise] and stores which offer incredible shopping experiences. Add that together and you have the potential for a strong Christmas season and continued double-digit sales and profit expansions.”

He noted that 60 percent of sales in the quarter came from new products, half of which were new items like the Soho Duffle and the other half tweaks on existing items.

Switching to Coach’s product, Frankfort said that in addition to handbags, gains were generated from a diversified offering intended for a wider range of uses and attitudes, including the Soho and Hamptons leather groups and the new Soho Mini Signature and classic Signature handbags. For holiday, Coach plans to introduce a new plaid group, occasion bags and clutches as well as cold weather items such as hats, gloves and scarves.

In addition, it recently introduced a classic favorites program, which is focused on long-term customers’ appetite for its classic product like the iconic stewardess station bag and briefcases.

Coach estimated, based on published reports, that the U.S. retail market for handbags over $100 and small leather goods is about $2.5 billion.

Frankfort reiterated growth strategies to ensure continued financial growth, including driving market share by leveraging its position as an “accessible” luxury lifestyle brand, adding 100 U.S. retail stores over the next four to five years and expanding its market share in Japan to 6 percent from over 3.5 percent today. It’s also seeking higher gross margins and expense leverage.

Looking ahead to the holiday season and the rest of the year, Frankfort said the momentum across all business channels has continued well into October and that he is confident in the firm’s outlook for the balance of 2004.

Michael Devine, chief financial officer, said for the current second quarter Coach is targeting earnings of at least 44 cents, or at least a 28 percent increase. Driven by full-price retail stores and continued double-digit gains in Japan, sales growth should reach or exceed 25 percent, to a minimum of $385 million, with comp gains of at least 10 percent.For the full year, he said he anticipates earnings of at least $1.09 and sales growth of at least 27 percent to $1.2 billion, with at least 10 percent comp gains in the U.S. and double-digit growth in Japan.

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