Handbag maker Coach posts first sales growth in 10 quarters

By Markets Reuters

Handbag maker Coach Inc's revenue rose for the first time in 10 quarters, helped by strong sales of its Stuart Weitzman-branded shoes and sustained growth in China, where the company managed to shake off the effects of a slowing economy.

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Shares of the company, which also reported a better-than-expected second-quarter profit, rose as much as 12 percent to $33.96 on Tuesday.

Coach's strong showing in China comes at a time when luxury companies such as BMW and LVMH are struggling to sell their wares to consumers who are tightening their purse strings.

Nike Inc and Burberry Group Plc are among the few brands that have managed to report sales growth in China, where the economy last year grew at its slowest pace in 25 years.

"In the long term, China remains the single largest opportunity for growth outside of North America," Chief Executive Victor Luis told Reuters.

"Even here in the U.S., we have seen sales to Chinese consumers continue to increase. All of this points to strong demand from the mainland Chinese consumer both at home and overseas when they travel."

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Total China sales rose 2 percent in the second quarter ended Dec. 26. Excluding Hong Kong and Macau, which continued to be laggards, China sales rose at a double-digit percentage rate.

Coach's strong performance in China and Europe underlines the premium status of the Coach brand across regions where it is not yet a mature brand and is not seen as ubiquitous, Conlumino retail analyst H��kon Helgesen wrote in a note.

China accounted for nearly 15 percent of Coach's total revenue in the fiscal year ended June, 2015.

The company, founded in a Manhattan loft in 1941, said sales from international markets rose 4 percent to $437 million.

Sales at Stuart Weitzman, which Coach bought last year, came in at $94 million. Net sales rose 4.5 percent to $1.273 billion.

Sales at established stores in North America fell 4 percent, including online sales, less than the 4.1 percent decline analysts had expected, according to Consensus Metrix.

Net income fell 7.3 percent to $170.1 million, or 61 cents per share. Excluding items, the company earned 68 cents per share.

Analysts on average had expected a profit of 66 cents per share and revenue of $1.276 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Ramkumar Iyer in Bengaluru, additional reporting Yashaswini Swamynathan; Editing by Sriraj Kalluvila and Sayantani Ghosh)