By  on April 25, 2007

Coach Inc. isn't about to rest on its laurels.

In reporting earnings that soared 37.8 percent in the third quarter, Coach on Tuesday outlined plans for future growth via two new lifestyle collections, a second fragrance line and new stores in the U.S. and overseas.

The company also said it continued to benefit from strength in the accessories market.

"The accessories category continues to grow at a 20 percent clip," said Lew Frankfort, chairman and chief executive officer, in a telephone interview. "There is enormous interest in accessories. The leading role that accessories is playing in women's wardrobes is extending now to moderate segments, and there are dramatic increases in the levels of consumers who are trading up [because of the] recognition on how accessories can update one's wardrobe."

For the three months ended March 31, net income leapt to $150 million, or 40 cents a diluted share, from $108.8 million, or 28 cents, in the year-ago quarter. Wall Street analysts were expecting 38 cents in earnings per share. Sales gained 30.3 percent, to $625.3 million from $479.7 million. Same-store sales rose 20 percent; retail stores increased 15.1 percent and factory stores rose 26.6 percent.

For the nine months, net income increased 33.6 percent, to $503.1 million, or $1.34 a diluted share, from $376.6 million, or 96 cents, in the year-ago period. Sales climbed 27.8 percent, to $1.96 billion from $1.53 billion.

During a conference call to Wall Street analysts, Frankfort said the company was shutting its corporate accounts business, in which Coach sold products to distributors for corporate gift-giving and incentive programs. The chairman said Coach found out that some goods were diverted to unauthorized channels, such as Costco, and that the "only way to control where [its] product was sold was to exit this business."

The first of Coach's upcoming launches will be the new lifestyle collection Bleecker, to hit stores in October. This will be followed by a second lifestyle collection, called Heritage Stripe, which will be fully launched next spring. A second fragrance line also will be introduced next spring.

Frankfort said the two lines were the company's response to voids in the market or to customer needs. "In one case, our consumer expressed considerable interest in a lighter-weight, leather-based collection inspired by our history, and Bleecker offers that. In terms of Heritage Stripe, it met a functional void since we don't have a comprehensive lifestyle collection of durable, chic, sporty totes," the ceo said in the interview.

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