* Third-quarter earnings/share $0.84 vs est $0.80
* Third-quarter sales $1.19 bln vs est $1.18 bln
* Annual dividend hiked 13 pct to $1.35/shr
* Shares up 11 pct
(Adds analyst comment, details, updates share price)
By Siddharth Cavale
April 23 Leather goods retailer Coach Inc
reported higher-than-expected quarterly sales after
expanding into clothing and shoes to compete with emerging
rivals, sending its shares up 11 percent in morning trading.
Coach, which relaunched itself this year as a "lifestyle
brand" after demand for its premium handbags began to sag, beat
Wall Street expectations by boosting sales in North America in
the third quarter.
Same-store sales in its biggest region rose 1 percent in the
quarter ended March compared to a year earlier, reversing a 2
percent decline in the preceding holiday quarter.
"The two biggest positives in the quarter were North America
same-store sales and gross margins being better than
anticipated," Edward Jones analyst David Yarbrough told Reuters.
Gross margins in the quarter rose 0.35 percentage points to
74.1 percent. Yarbrough attributed the margin rise to the higher
sales in North America.
The New York-based company is facing competition at home
from rivals such as Michael Kors Inc and Fifth &
Pacific's kate spade, whose competitively priced
clothing and accessories have gained popularity and eaten into
To compete, Coach unveiled a new strategy in January to
expand into footwear and clothing, spooking investors with the
notion that strong demand for its handbags -- some of which sell
for as much as $1,200 -- may be easing.
"Our new footwear assortment, which launched during March in
over 170 stores in North America and 60 directly operated stores
internationally, has been very well received," Victor Luis, the
company's chief commercial officer, said in a statement.
Coach's overall sales in North America, including online
sales, rose 7 percent in the quarter. North America accounted
for about two-thirds of the company's sales during the period.
"The footwear strategy is working and holding up very well,
which is leading to increased traffic as well as number of
transactions," Citi analyst Oliver Chen said.
International sales rose 6 percent to $382 million in the
quarter, driven by a 40 percent rise in sales in China. The
company did not give a dollar figure for its Chinese sales.
Overall, the company's revenue rose 7 percent to $1.19
billion in the third quarter, beating the average analyst
forecast of $1.18 billion, according to Thomson Reuters I/B/E/S.
Net income rose to $239 million, or 84 cents per share, for
the quarter ended March 30 from $225 million, or 77 cents per
share, a year earlier.
Analysts on average had expected the company to report
per-share earnings of 80 cents.
Coach also said it would raise its annual dividend by 13
percent to $1.35 per share.
The stock, trading at $56.12, was one of the highest
percentage gainers on the New York Stock Exchange.
(Additional reporting by Maria Ajit Thomas; Editing by
Sreejiraj Eluvangal and Robin Paxton)