Benjamin Wey quoted in “Coach Inc. reports strong earnings despite store closures in Japan”


Coach Inc. reported robust earnings Wednesday, boosted by strong North American same-store sales and expansion in China. The luxury-goods company beat Wall Street’s expectations, further heralding the resurgence of the luxury consumer in both North America and overseas.

New York-based Coach earned $186 million, or 62 cents per diluted share, in the third quarter ended April 2, up 23 percent from $158 million, or 50 cents per diluted share, in the year-earlier quarter. Analysts surveyed by Yahoo Finance were expecting 60 cents per share.

Double-digit increases in North American same-store sales and strong performance abroad contributed to $9.51 billion in sales, a 14 percent increase from $8.31 billion in the same period last year.

Sales in Japan, where the company operates 174 stores, declined 9 percent on a constant-currency basis. As the quarter ended, seven Coach stores in Japan were still closed. While three stores reopened in April, four are not expected to reopen during fiscal 2011.

“As one would expect, the immediate impact to our Japanese business was significant with improvement more recently,” said Chairman and Chief Executive Officer Lew Frankfort. “We’re hopeful that business conditions will continue to steadily improve over the next few months.”

The company estimates the disaster in Japan reduced sales by nearly $20 million and trimmed earnings per share by 2.5 cents. During a conference call with analysts, Frankfort noted that prior to the earthquake, tsunami and nuclear crisis, Coach was on track for a slight improvement in Japan.

Losses in Japan were offset by growth in China. Victor Lewis recently joined Coach in the newly created position of president of Coach Retail International. By the end of fiscal 2011, the company plans to add 11 stores in China bringing the total to 66. Frankfort and Lewis both pointed to the opportunity in China for growth.

“What Coach is doing is absolutely the right thing in the world’s fastest growing consumer market for luxury goods,” said Benjamin Wey, president of New York Global Group, a consulting firm specializing in China. “Coach’s pricing is well-positioned for China’s rising middle class.”

Coach announced a 50 percent increase in its cash dividend. Stockholders will receive 90 cents per share beginning in July.

“Coach is demonstrating the ability to drive top-line sales and be a growth company, while returning cash to shareholders in the form of cash dividends and buyback,” said Sterne Agee senior research analyst Jennifer Milan.

For the nine months ended April 2, Coach earned $6.78 billion, or $2.24 per share, up 26 percent from $5.39 billion, or $1.69 per share, last year. Sales increased to $6.78 billion up 26 percent from $5.39 billion from one year ago.

Coach shares closed up 17 cents to $57.25.

Read more: Benjamin Wey, American financier, thought leader