Strong overseas, US sales lift Coach 1Q profit
NEW YORK (AP) — Coach Inc. reported a 3 percent increase in first-quarter profits as the luxury accessories retailer's results were powered by strong sales in the U.S. and overseas, particularly China.
The New York-based retailer also said Tuesday that its board authorized the repurchase of up to $1.5 billion of its outstanding stock by June 30, 2015.
Coach's shares rose $4.18, or 7.7 percent, to $58.35 in late trading after rising as high as $59.77 earlier in the session. That is still well below their 52-week high of $79.70 in March.
In a statement, Lew Frankfort, chairman and chief executive of Coach, said the company was "well positioned for the holiday season." He also noted Coach continues to make progress in fashion innovation, expanding its international business, becoming a leader in men's accessories and harnessing the power of the digital world.
Coach reported net income of $221.4 million, or 77 cents per share in the three-month period ended Sept. 29. That compares with $215 million, or 73 cents per share, in last year's quarter.
A reduction in the number of outstanding shares gave the earnings-per-share results a boost of about 2 cents.
Revenue rose 11 percent to $1.16 billion in the quarter.
Analysts, on average, had expected 75 cents per share on 1.16 billion in revenue, according to FactSet.
Revenue at its North American stores opened at least a year rose 5.5 percent. The figure is a key gauge of a retailer's health, because it excludes results from stores recently opened or closed.
Total North American sales increased 8 percent to $784 million. Its North American online sales rose 11 percent.
During the summer, Coach reinstated coupons at its factory stores because of increased discounting among retailers.
International sales rose 15 percent to $362 million. The company's China business remained robust, with total sales up nearly 40 percent. In Japan, sales rose 1 percent on a constant-currency basis, while dollar sales were even with the prior year, adjusted for a slightly weaker yen.
Coach launched what it calls its Legacy collection of products, tailored for both men and women, during the quarter. The company calls the line its biggest product launch in many years and it is backing the launch with online, print, and outdoor advertising, as well as in-store efforts. Frankfort said that the Legacy collection is being "embraced by consumers across all geographics and demographics."
Laura Champine, an analyst at Canaccord Genuity, wrote in newsletter to clients Tuesday that she expects Legacy to quickly become the company's top-selling line at around 30 percent of total revenue. She is raising second-quarter profit estimates for Coach by 3 cents to $1.31. Analysts expect $1.29 per share for the second quarter, according to FactSet.
For the holiday season, Coach is stepping up its assortment of accessories for Apple's iPads and other gadgets. Coach is also expanding its men's offerings at the stores, says Jerry Stritzke, president and chief operating officer at Coach.
During the latest quarter, Coach opened five factory stores including three Men's factory stores in North America. This brought a total of 354 retail stores and 174 factory stores as of Sept. 29. It now has 104 locations in China, 188 in Japan, seven in in Singapore, 27 in Taiwan, 10 in Malaysia and 48 in Korea.