Coach Exceeds Estimates as It Grows Overseas

NEW YORK, United States — Coach Inc. posted first-quarter earnings that topped analysts' estimates after sales grew overseas and the handbag maker cut back on discounts as part of a turnaround plan. The shares jumped as much as 11 percent.

Excluding restructuring costs, earnings amounted to 53 cents a share in the period ended Sept. 27, the New York-based company said today in a statement. Analysts had estimated 45 cents on average, according to data compiled by Bloomberg. While North American same-store sales fell 24 percent, that was slightly better than the 25.5 percent drop predicted by analysts tracked by Consensus Metrix.

Coach, the largest U.S. luxury handbag maker, has been adding new, more fashionable -- and more expensive -- products for men and women, including apparel, accessories and leather goods. The retailer also is reducing discounts, refreshing stores and last month rolled out a new marketing campaign as part of its efforts to recapture lost share to competitors like Michael Kors.

Those efforts are hurting sales in the short run, though they have to be done to improve profit, said Matthew Jacob, a New York-based analyst at ITG Investment Research. “They’re in transition,” he said in an interview before the results were released.

The earnings report sent the shares up as high as $40 in premarket trading. Coach had slumped 36 percent this year through yesterday, compared with an 6.1 percent rise for the Standard & Poor’s 500 Index.

Store Closings

Chief Executive Officer Victor Luis said in June that Coach would close a fifth of its North American locations, or 70 stores. Most of the planned closures will happen in the fiscal first half, with restructuring costs incurred in the fiscal year 2015, Coach said in August.

Coach also plans to open new locations or remodel the main stores in its 12 biggest markets and reduce involvement in online flash sales. The company also has cut 150 jobs.

The retailer is touting itself as "modern luxury" by adding more fashionable accessories and apparel that were presented at New York fashion week in September. Coach is also layering in higher-priced goods as it tries to become a lifestyle company. Spearheading the changes is Stuart Vevers, who was hired in mid-2013 as executive creative director after working at some of the top European luxury brands, including Louis Vuitton.

By: Lindsey Rupp; editors: Nick Turner and Niamh Ring.