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NEW YORK – Coach Inc. posted better-than-expected second-quarter earnings growth and upped its fiscal year 2006 profit forecast citing strong demand for its leather accessories, especially as gifts during the holiday season.
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The New York-based company said Tuesday that earnings in the three months ended Dec. 31 climbed 37.2 percent to $174.2 million, or 45 cents a diluted share, ahead of both the company’s and analysts’ estimates for 44 cents. Coach earned $126.9 million, or 32 cents, in the year-earlier period. Results in both periods included option expenses.
Quarterly revenues jumped 22.2 percent to 650.3 million from $531.8 million last year.
Following a conference call with Wall Street investors and analysts, shares of the company rose 8 percent to $34.63 in Tuesday afternoon trading. Volume was 5.3 million, which is above its average trading volume of 2.8 million.
Lew Frankfort, chairman and chief executive officer of Coach, said in a written statement that all channels of business were strong during the quarter and reflected the company’s position “as a gift authority.” Handbags and women’s accessories drove results, Frankfort said. In fiscal 2006 Coach expects sales to reach $2.1 billion and earnings of $1.23 a share, including option expense. Analysts expect the company to earn $1.20 on sales of $2.11 billion for the year.
“It’s worth mentioning that in U.S. retail stores we have achieved a double digit comp in the second quarter in each of the last four fiscal years,” said Frankfort on the conference call. “And these, our full priced stores, on average are 76 percent more productive than they were just four holidays ago, even in this, our most developed quarter.”
Frankfort went on to say that the “U.S. handbag and accessory category sales grew at a robust 15 percent during the fall season. Clearly we continue to see increased attention paid to the accessory category due to its sustained growth as retailers and apparel brand are looking to take advantage of the perceived opportunity in this high margin business. We welcome this intensified competition as it drives consumer interest.”
For complete coverage, see tomorrow’s WWD.