Tags: Coach | design | savvy | COH

Coach Uses Design Savvy to Power Growth

Friday, 06 Jan 2012 06:34 AM

By Tim Plaehn

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Accessories design and marketing company Coach (COH) recently became the first U.S. corporation to be listed on the Hong Kong stock exchange, recognizing the company's growth prospects in Asia. The company relies on high-end design savvy to power its continued growth.

Coach was founded in a Manhattan loft in 1941. The company purpose is to maintain the highest standards of material and workmanship for lines of men's and women's accessories in a classic American style. Coach products are sold through 500 Coach stores and 1,000 department stores in the United States and Canada.

In Asia, Coach controls the sales of merchandise through direct sales, company stores or company kiosks in major department stores. Coach has major sales presences in Japan, China, Taiwan and Singapore.

Coach closed out the company's 2011 fiscal year on July 2. For the full year, Coach reported net sales of $4.16 billion, up 15 percent from $3.61 billion in fiscal 2010. Net income for the year was $881 million or $2.92 per fully diluted share, up 25 percent from $2.33 a year earlier.

For the first quarter of 2012, the company reported a year-over-year sales increase of 15 percent, while net income of 73 cents per share was 16 percent above the 63 cents earned a year earlier.

Growth rates

Highlights of the first quarter results included 17 percent growth year-over-year in direct-to-consumer sales, including online sales and company-owned stores. Comparable store sales growth was 9.2 percent.

Sales through the department store channels grew by just 4 percent. Department store sales accounted for 13 percent of total quarterly revenues. CEO Lew Frankfort noted: "We are also particularly pleased with results in our directly-operated international businesses, as China continues to thrive."

Coach has aggressively increased its quarterly dividend over the last two years, to 15 cents in 2010 from 7.5 cents in 2009. That was followed by an increase to 22.5 cents per share in 2011.

Recently, the analysts at Piper Jaffray reiterated their buy rating on Coach and increased their target price to 20 percent above the current share value. Barclays Capital analysts reiterated their overweight rating and increased their target price by $6 per share.

The company next reports on Jan. 25.

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