Luxury handbag maker Coach Inc. said Wednesday better business in North American stores during the holidays helped lift its second-quarter profit by 11 percent.
Lew Frankfort, CEO of the New York company, said he expects "healthy sales and earnings growth over the balance of the fiscal year" but did not give specific guidance.
The company has introduced more handbags priced at under $300 to spur sales as luxury retailers feel the effects of the weak economy.
Sales in stores open at least a year — a key measure of retail health — rose 3.2 percent in North America, the first increase in over a year.
"The trend in our domestic business built steadily over the quarter, with December our strongest month, reflecting Coach's position as a gift resource," Frankfort said.
The lower-priced Poppy line, which will be relaunched in the spring with a new colors and styles, was a strong seller, Frankfort said.
Luxury retailers from Saks Inc. to Nordstrom have reported a pickup in holiday sales. Tiffany Co. last week said sales rose 17 percent in November and December and raised its annual forecast.
Coach shares fell $2.25, or 6 percent, to $35.20 in morning trading.
For the three months ended Dec. 26, Coach's profit rose to nearly $241 million, or 75 cents per share. That's up from $216.9 million, or 67 cents per share, a year ago, and beat the 72 cents a share that analysts polled by Thomson Reuters, on average, had expected.
Revenue rose 12 percent to $1.07 billion from $960 million a year ago. Analysts expected revenue of $1.02 billion.
Direct-to consumer sales rose 14 percent to $934 million, helped by stronger North American sales. Indirect sales fell 8 percent to $131 million, as Coach continued to reduce shipments to U.S. department stores and focus on its own retail and factory stores.
For the balance of the year, "We're well positioned for the 'new normal' and expect to further expand our North American market share," Frankfort said.
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