Coach Q3 profit boosted by sales growth

Upscale footwear, handbags and accessories retailer Coach Inc has posted 6% third-quarter profit growth, boosted by sales in North America and overseas.

The New York-based company, which is in the process of transforming itself into a global lifestyle brand, said net income grew to $239 million for the quarter to 30 March, compared to $225 million the same period last year.

Coach

Sales rose 7% to $1.19 billion from $1.11 billion the prior year. On a constant currency basis however, sales increased 10%.

Total North American sales rose 7% to $792 million, while North American direct sales increased 8% with comparable store sales up 1%. International sales grew 6% to $382 million with strong gains in China. Gross margin improved 35 basis points on a year-over-year basis to 74.1% from 73.8%.

Chairman and CEO Lew Frankfort said: “We’re pleased with the solid results we achieved in the third quarter as well as the progress we’re making towards our transformation to a global lifestyle brand, anchored in accessories. “Our results demonstrate the brand’s strength across channels, categories and geographies, and reflect the traction we’re achieving in men’s and digital, two key initiatives.”

President and chief commercial officer Victor Luis added that the company’s international business is growing “rapidly” with China now on course to generate about $425m in sales this year.

Coach has also reached an agreement to purchase its partner’s 50% interest in its businesses in the UK and Europe, with the transaction expected to close in July. “We believe the region has significant long term potential, attracting both domestic shoppers and the international tourist,” Luis said.

In addition, Coach announced that its president and executive creative director, Reed Krakoff, has decided not to renew his contract, which expires June 2014, to focus exclusively on his namesake brand. A search for his successor is underway.

The company is exploring strategic options for the Reed Krakoff brand, which may involve a sale to a group in which Krakoff would participate.

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