Coach shares soar 11% on impressive quarter

The company beats profit and revenue expectations, bolstered by sales of men's goods.

By Jonathan Berr Apr 23, 2013 12:06PM
Coach handbags on display in the window of a Coach store in New York (© Daniel Acker/Bloomberg via Getty Images)After posting disastrous results in its last reported quarter, Coach (COH) has rebounded nicely in the third quarter, which should allay investors' concerns about the viability of the luxury consumer.

The luxury goods maker said profit rose 6.2% to $238.9 million, or 84 cents per share, from $225 million, or 77 cents a share, a year earlier, fueled by gains in North America. Revenue rose 7% to $1.19 billion. Analysts had expected a profit of 80 cents a share on revenue of $1.18 billion. Coach also raised its dividend by 13%. For a closer look at the numbers, click here.

As Bloomberg News noted, Coach is working to "turn itself into a dual-gender lifestyle brand." The company expects its men's business to double to more than $600 million in sales this year as it increases its lineup of products. China, now the largest luxury market, is another area of growth. Coach, best known for its stylish handbags, has recently launched a line of shoes that was especially well received by consumers, according to the company.

Shares of Coach rose $5.61, or 11.1%, to $56.20 in morning trading.

Though the company continues to face stiff competition from the likes of Michael Kors (KORS) and Ralph Lauren (RL), many experts say the luxury consumer is proving resilient amid all the talk about sequestration in the U.S. and a slowdown in China's red-hot economy. U.S. same-store sales, a key retail metric of locations opened at least a year, rose 1% in the quarter, surpassing the decline some analysts had expected.

When the economy was in the dumps during the recent slowdown, even wealthy consumers became frugal, or at least were reluctant to discuss their luxury purchases. That's changing. A survey released earlier this year by Accenture found that 48% of respondents said they  planned to purchase luxury clothing or personal care products in the next six months.

Writer Buzz Bissinger is such a consumer. He recently admitted to spending $587,412.97 on designer clothes between 2010 and 2012. Coach wasn't among the designers he listed in his recent confession, published in GQ. Perhaps the company might want to invite the best-selling author to one of its shows.

--Jonathan Berr is among the least fashionable people in New Jersey. He doesn't own any of the listed shares. Follow him on Twitter @jdberr.


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