Coach Net Income Jumps On Big Sales Gains

Associated Press

FILE - In this May 4, 2010 file photo, people window shop as they walk past a Coach store in San Francisco. Coach said Tuesday, Oct. 26, 2010, strong demand for its luxury handbags both in North America and overseas helped third-quarter net income rise 34 percent.

Coach Inc. said Tuesday strong demand for its luxury handbags both in North America and overseas helped third-quarter net income rise 34 percent.

Results beat Wall Street expectations and shares rose $1.28, or 2.9 percent, to $45.75 in premarket trading.

Net income rose to $188.9 million, or 63 cents per share. That compares with $140.8 million, or 44 cents per share, last year. Analysts polled by Thomson Reuters, on average, expected 55 cents per share.

Revenue rose 20 percent to $911.7 million from $761.4 million. Analysts expected $846.8 million.

Coach, based in New York, started selling more handbags under $300 to offset a spending dropoff during the recession.

It has also expanded its own retail stores, including off-price factory stores, to offset weakness at department stores, which were among the hardest-hit parts of the retail sector during the recession.

However, Coach's report Tuesday signaled department stores might be gaining strength. Coach said there was significant growth in shipments into U.S. department stores during the quarter as stores placed bets for the holiday season.

Direct-to-consumer sales, which includes Coach's own store revenue and online sales, rose 19 percent to $775 million from $654 million last year.

Revenue in North American stores open at least a year rose 8.5 percent. That is a key indicator of a retailer's performance because it excludes growth at stores that open or close during the year.

The measure rose 3 percent in Japan and in the double digits in China.

CEO Lew Frankfort said the company expects double-digit revenue and earnings growth.

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