UPDATE 4-Coach profit beats, eyes Europe expansion

* Q3 EPS 50 cents vs Street view of 46 cents

* Doubles dividend, OKs $1 bln share buyback program

* Accelerates China targets, announces Europe expansion

* Shares up 0.9 pct
(Adds CEO comment, details, background; updates stock)

By Ben Klayman

CHICAGO, April 20 (BestGrowthStock) – U.S. leather goods maker
Coach Inc (COH.N: ) posted better-than-expected quarterly
earnings as demand picked up in North America and said it would
expand into Western Europe.

The company, which makes handbags, wallets, shoes and other
accessories, also doubled its cash dividend, authorized a $1
billion share buyback program, and accelerated its China sales
target by a year.

Its shares, which have risen more than 130 percent over the
past year, were up 36 cents at $42.22 in afternoon trading.

Coach Chief Executive Lew Frankfort said demand in the
company’s full-priced business was improving, part of a
consumer spending revival as the economy picks up.

“We were able to demonstrate across all geographies a
strengthening of our business, which bodes well for the
future,” he told Reuters in an interview. “Consumers are less
negative about the future than they have been.”

Net income rose 37 percent to $157.6 million, or 50 cents a
share, in Coach’s fiscal third quarter that ended March 27,
compared with $114.9 million, or 36 cents a share, a year ago.

Analysts on average were expecting 46 cents per share,
according to Thomson Reuters I/B/E/S.

Sales rose 12 percent to $830.7 million, above the $811.5
million analysts had expected. North American same-store sales
rose 5.1 percent, up from a 3.2 percent gain in the previous
quarter when it rose for the first time in over a year.

U.S. consumer traffic was up from the previous quarter,
while those buying items once in the store rose significantly
from last year, Frankfort said, adding he expects spending for
Mother’s Day to be higher than last year.

Frankfort said Coach, which on Monday introduced a new line
of totes and shoulder bags named “Julia,” still believes it can
realize double-digit sales and earnings growth.

“Two years from now, we will look back upon this quarter,
the initiative that we announced in Europe, the acceleration of
our business in China and the rejuvenation of our full-priced
businesses and conclude that it indeed was an inflection
point,” he said on a conference call.

Coach estimates the U.S. handbag and accessories category
rose at least 5 percent in the January-to-March quarter, while
Coach’s sales across all North American channels in the recent
quarter increased about 15 percent.


Coach also accelerated its China growth plans by a year,
saying it was now targeting $250 million in sales during fiscal
2012. The company will open its first large, flagship mainland
China store in Shanghai this week. That adds to the 37 stores
already open in China, including 25 on the mainland.

Same-store sales in China, where the company is now
profitable, in the third quarter were up double digits.

The company also announced plans to expand into Western
Europe for a second time, after having failed selling its
products there in the mid-1990s.

“Given further globalization, we feel that there’s even
stronger growth opportunity ahead than even we had been
modeling thus far,” said Sterne, Agee & Leach analyst Jennifer
Milan, who has a “buy” rating on the stock.

Coach said it plans to open at least 14 locations in
Printemps department stores throughout France over the next
three years, with its first shop in Paris in June. Frankfort
said the French initiative will not dilute earnings.

Coach also said it has reached an agreement in principle
for a joint venture with British retailer Hackett Limited to
open Coach stores in Britain, Spain, Portugal and Ireland. It
expects the first locations in Britain and Spain will open
during the next 12 months.

The company’s board voted to double its cash dividend,
raising it to 60 cents per share on an annual basis starting
with the payment in July. It also authorized the repurchase of
up to $1 billion of outstanding common stock by June 30, 2012.

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(Reporting by Ben Klayman, editing by Maureen Bavdek)

UPDATE 4-Coach profit beats, eyes Europe expansion