Coach up on North American sales

Source: Retail Exec

Date :23/04/2008 01:29:05

Coach Inc., the largest U.S. luxury maker, said Tuesday third-quarter profit rose eight percent after strong sales in the North American market.

For the quarter ended March 29, net income rose to $162.4 million, or 46 cents per share, from $150 million, or 40 cents per share in the prior year quarter.

Analysts expected earnings of 45 cents per share.

North America

Revenue grew 19 percent to $744.5 million from $625.3 million a year earlier, topping analysts’ forecast of $732.6 million. This was driven by strong sales in North America which grew 15 percent, with sales at stores rising 20 percent during the period.

Luxury goods

Analysts had concerns about how well luxury goods makers such as Coach would fare as U.S. customers face an economic downturn. However, North American same store sales - a key indicator of retailer performance - rose nine percent.

Same-store sales in Japan, the company's second-largest market, rose 25 percent, or 12 percent when excluding the effects of the strong yen.

However, Lew Frankfort, Coach's chairman and chief executive, warned of further pessimism by consumers. "Clearly the environment has weakened," he said on the conference call to discuss results.

"It's going to be a rough go throughout the entire calendar year on a macro basis. Consumers are more pessimistic."

Fourth quarter

Despite strong results, shares declined sharply after the company said it would wait to give fourth-quarter guidance because of uncertainty in the economic backdrop.

Coach also and said it will no longer provide a sales breakdown between its North American retail stores and factory outlets, prompting shares to drop 4.3 percent to $31.11.

“While less detailed, this measure better aligns operational performance reporting with operational flexibility to respond to changes in market dynamics,” Mr. Frankfort said.

April 23, 2008