NEW YORK — Citing double-digit sales gains and continued margin expansion, Coach Inc. enjoyed a 39 percent increase in net income for its second fiscal quarter, which included holiday sales.
The New York-based accessories maker said after the market closed on Monday that its profits soared to $39.2 million, or 88 cents per diluted share for the quarter ended Dec. 30, beating Wall Street expectations. That compares with earnings of $28.3 million, or 65 cents.
Net sales were up 10 percent to $214.2 million from $194.1 million.
Lew Frankfort, chairman and chief executive, said in light of the very promotional holiday season and weakened retail environment in the U.S., sales growth demonstrates “the strong emotional bond we have built with our consumers who appreciate the quality, durability and craftsmanship of Coach products.
“Clearly, the value that the Coach brand offers takes on added significance during challenging economic conditions,” he said.
By division, direct-to-consumer sales, which consist primarily of sales at Coach stores, rose more than 8 percent to $145.7 million. Comparable-store sales rose 2.6 percent, with retail stores up 1.2 percent and factory stores up 4.4 percent.
Wholesale sales increased more than 15 percent to $68.4 million, Results were driven by strong gains in the international division, highlighted by continued double-digit increases in comparable location sales to Japanese consumers worldwide.
Sales growth also stemmed from “the consistent application of our philosophy of a 365-day full-price proposition in our retail stores,” Frankfort said Jan. 10, when the company announced it expected its quarter earnings to beat expectations. At that time, the leather maker said that it would raise its earning expectations to 85 cents a share from its original forecast in October of between 77 and 80 cents, up from 65 cents earned last year.
During the quarter, the company opened seven Coach retail stores and two factory outlet stores, bring the total to 114 retail stores and 65 factory stores. In addition, seven retail stores were renovated and two stores were relocated or expanded.
Looking ahead, Frankfort said he is “enthusiastic about the prospects for spring, when we will be introducing our first archival Coach Signature lifestyle accessories collection.” In addition, the company will introduce the Bonnie’s Legacy handbag group, as well as the new styles and fresh color palette and new styles for the Hampton collection.
Coach sold 7.4 million shares, or 17 percent, at $16 each, raising $118.08 million in its initial public offering on the New York Stock Exchange on Oct. 4. Sara Lee Corp. retained 83 percent, which it is expected to sell sometime in the coming year. Coach, which was founded in New York in 1941 and had sales of about $550 million last year, has been owned by Sara Lee since 1985.

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