Coach rides rebound in luxury goods demand

Coach, the upmarket US handbag and accessories brand, said on Tuesday it expects double-digit sales and earnings growth during the holiday shopping season, underlining the recovery in discretionary spending among more prosperous consumers. Lew Frankfort, chief executive, said the company was benefiting from the “resiliency” of demand for handbags and accessories in North America, and from its continuing international growth, as it reported first-quarter results that exceeded Wall Street’s expectations. EDITOR’S CHOICE Coach targets UK in European push - Oct-13 Fearless Prada chief weighs HK listing - Oct-08 US luxury stores outperform rest of retail sector - Oct-07 Mulberry bags record as sales surge - Oct-07 Luxury stores caught out by surge in demand - Oct-01 In depth: Business of luxury - Jul-16 Coach’s forecast sales rise comes at a time when most retail industry estimates are predicting subdued holiday sales growth for the retail sector as a whole of about 2 per cent. Coach’s quarterly sales rose 20 per cent to $912m against a year ago, despite what Mr Frankfort called “muted” consumer demand, while net income rose 34 per cent to $189m, with earnings per diluted share of $0.63. Coach’s direct-to-consumer sales at its own stores increased 19 per cent to $775m, with double-digit sales growth in its fledgling China business, and a 3 per cent increase in sales in Japan on a constant currency basis. Indirect sales to department stores and other wholesale customers increased 27 per cent to $136m, with the company seeing “significant” growth in shipments into US department stores and to international wholesalers. Mr Frankfort said Coach’s surveys of its shoppers in the US during the quarter showed that their “future purchasing intent” was at the highest level seen for the past two years. The company says it expects continue to expand its US footprint of 345 stores at an annual rate of around 8 per cent in its current fiscal year, at a time when most retailers are growing by less than 5 per cent. It is also planning to add another 25 new locations in China, where it currently has 49 stores, increasing its square footage by about 60 per cent. It reported sales of over $100m from its fledgling business in China in its last fiscal year. Mr Frankfort said that he believed Coach could increase its share of its market from 5 per cent currently to around 15 per cent, similar to the share it has achieved in Japan, where it has 160 stores. Coach is also beginning to expand into Europe, with plans to open its first stores in the UK, and new locations in France, Spain, Portugal. Coach avoided the steep sales declines seen by the broad luxury sector during the depths of the US recession, supported a decision to avoid sales at its main stores, and to instead introduce more moderately priced product lines. Coach’s shares closed up $5.30, or 12 per cent, in New York at $49.78. Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.