Bloomberg News

Coach’s Profit Beats Estimates on Sales in North America

October 25, 2011

(Updates with closing share price in fifth paragraph.)

Oct. 25 (Bloomberg) -- Coach Inc., the largest U.S. luxury handbag maker, reported a quarterly profit that topped analysts’ estimates and predicted an “excellent” holiday season because of demand in North America.

Net income in the fiscal first quarter ended Oct. 1 rose 14 percent to $215 million, or 73 cents a share, from $188.9 million, or 63 cents, a year earlier, New York-based Coach said today in a statement. Analysts projected 70 cents a share, the average of 18 estimates compiled by Bloomberg.

Shoppers snapped up women’s $358 Madison satchels and men’s $428 Bleecker suede totes during the quarter amid stock market volatility and sluggish consumer confidence. Sales at North American stores open at least a year climbed 9.2 percent, exceeding the 5 percent gain projected by David Schick, an analyst with Stifel Nicolaus & Co.

“North American sales were very robust,” he said in a telephone interview. “Consumers are spending on what they want to spend on. When discretionary leaders like Coach show this kind of momentum, it means the fears of a weak holiday are a little bit overdone,” said Schick, who is based in Baltimore recommends buying the shares.

Coach fell 1.8 percent to $61.56 in New York as the Standard & Poor’s 500 Index retreated 2 percent, partly on confusion over how much progress European leaders are making in debt-crisis talks. The shares gained 11 percent this year.

Holiday Season

Revenue advanced 15 percent to $1.05 billion, topping the $1.02 billion average estimate of 16 analysts. Chief Executive Officer Lew Frankfort has been opening more stores in China and Europe and expanding its line of men’s goods.

“Given the current momentum of our business, strength of our product pipeline, breadth of our assortment and shoppers’ strong interest in accessories for gifts and self-purchase, Coach is clearly well positioned for another excellent holiday season,” Frankfort said in the statement.

In China, comparable sales grew at a “double-digit” rate in percentage terms, Coach said.

“There have been some mixed messages from China on its pace of its growth but Coach is continuing to execute,” Schick said.

--Editors: James Callan, Kevin Orland

To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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