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Coach’s Profit Jumps 34%, Beating Analysts’ Estimates

Coach’s Profit Jumps 34%
A large Coach tag sits on display amongst other products in the Coach flagship store on Madison Avenue in New York. Photographer: Daniel Acker/Bloomberg

Oct. 26 (Bloomberg) -- Coach Inc., the largest U.S. maker of luxury leather handbags, reported a 34 percent increase in first-quarter profit after luring more shoppers to its stores. The stock climbed the most in 18 months.

Net income rose to $188.9 million, or 63 cents a share, the New York-based company said today. That compared with the 55-cent average of estimates compiled by Bloomberg. Sales gained 20 percent to $911.7 million, also topping projections.

Chief Executive Officer Lew Frankfort cited “resiliency” in handbags and accessories in North America for the gains. Some U.S. consumers are spending more on discretionary goods such as Coach’s Poppy bags, which typically sell for $200 to $400. The company also cut average prices to spur spending.

“It’s reflective in part on the success of their overall pricing strategy that they introduced last summer,” Jennifer Milan, an analyst with Sterne Agee & Leach Inc. in New York, said in a phone interview. She advises investors to buy Coach shares.

Coach also boosted sales by expanding in Western Europe and accelerating store openings in China. This year the company also debuted men’s stand-alone stores and introduced new Charm and Julia totes.

The stock rose $5.30, or 12 percent, to $49.78 at 4:00 p.m. in New York Stock Exchange composite trading, the most since April 2009. The shares have climbed 36 percent this year.

Comparable-store sales climbed 8.5 percent in North America in the quarter ended Oct. 2. A year earlier, first-quarter profit amounted to $140.8 million, or 44 cents a share.

To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net; Ian Thomson in New York at ithomson2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net.

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