NEW YORK, ISA – Coach Inc said yesterday its fiscal first quarter profit rose 14 per cent as shoppers spent more on handbags in North America and its men’s offerings and sales overseas continued to grow.

Results beat expectations and the company sounded an upbeat note about the upcoming holiday season.

Coach has been an outperformer in recent quarters as luxury consumers continue to spend money in North America despite the uncertain economy, and current results are a sign that the trend is continuing. Coach executives said in a conference call that consumers have been shopping consistently, despite what one analyst called the “whiplash” of the market recently.

“Traffic volatility is not something we’re seeing at all, we’re seeing a very consistent pattern,” said Michael Tucci, president of Coach’s retail division in North America.

For the holiday season — November and December — Coach plans on introducing new items in its higher priced Madison line, gifts such as iPad covers and wristlet bags and more items under US$100.

CEO Lew Frankfort said Coach is “well positioned for another excellent holiday season,” due to the momentum of its business and breadth of offerings.

Coach started selling more bags under US$300 during the recession, but the average retail price of its handbags is inching back up. About 22 per cent of handbags sold were over US$400 during the quarter, compared with 16 per cent last year.

The New York company reported net income rose to US$215 million, or 73 cents per share, for the three months ended October 1, up from US$188.9 million, or 63 cents per share, a year ago.

That beat analysts’ expectations of 70 cents per share, according to a poll by FactSet.

Revenue rose 15 per cent to US$1.05 billion from US$912 million a year ago. Analysts expected US$1.02 billion. Revenue in stores open at least one year rose 9.2 per cent in North America. The measure is important since it excludes results from stores that open or close during the year.

Gross margin — the percentage of each dollar in revenue the company keeps as profit — declined to 72.8 per cent, from 74.2 per cent last year, due to higher sourcing costs. Many companies are facing gross margin declines as commodity costs rise. Coach said it expects its gross margin rate will remain about 72 per cent to 73 per cent for the remainder of the fiscal year.

In North America, the company opened two retail stores, including one men’s store and closed two locations. At quarter’s end, the company operated 345 retail stores and 152 factory stores in North America.

Coach said its online sales are growing in the double digits. Its mobile commerce site is helping drive traffic to its website, with about 15 per cent of coach.com visits coming from a mobile device.

Coach has been focusing on increasing its men’s offerings and expanding abroad. Within the next five years it expects about half of its sales will come from overseas, compared to 30 per cent today.

In China, Coach’s fastest growing segment, revenue in stores open at least one year rose in the double-digit percentage range. The company opened four new locations in China in the quarter and one in Macau, bringing the total to 71.

Coach now expects revenue of US$300 million from the region for the year, the high end of the guidance the company gave in August.

Frankfort said its men’s business has had “excellent response” to its men’s offerings both in dedicated stores and dual-gender stores.

“We remain confident in our ability to deliver double-digit sales and earnings growth during our planning horizon given the strength of the Coach brand and our increasing global expansion,” Frankfort said.

Shares rose 62 cents to US$63.28 in morning trading yesterday as the broader market fell.

AP