NEW YORK – Coach Inc. said Tuesday strong demand for its luxury handbags both in North America and overseas helped first-quarter net income rise 34 percent and sounded a positive note about the upcoming holiday season.
The increases topped expectations and eased fears about affluent shoppers' willingness to spend. Shares rose 10 percent, to their highest point since 2007.
"In general consumers are cautious, but they are less pessimistic than they were a year ago and they are spending more in the category than they did a year ago," said CEO Lew Frankfort in a phone interview.
Net income rose to $188.9 million, or 63 cents per share. That compares with $140.8 million, or 44 cents per share, last year. Analysts polled by Thomson Reuters, on average, expected 55 cents per share.
Revenue rose 20 percent to $911.7 million from $761.4 million. Analysts expected $846.8 million.
Coach, based in New York, started selling more handbags under $300 to offset a spending dropoff during the recession.
Coach said they remain dedicated to that strategy but noted that the average unit retail price of handbags sold rose slightly during the quarter.
"We're feeling great about the holiday season given the current sales trends in both our full-price and factory channels," said Michael Tucci, president of North American retail.
For the holiday season, Coach plans to introduce new styles and colors in its existing bag lines and offer more small bags at lower prices. The company also plans to introduce new items throughout the next eight weeks rather than introducing the majority in October as it has in years past, as shoppers continue to shop closer to when they need the items.
Direct-to-consumer sales — which account for about 88 percent of Coach's revenue and include Coach's own store revenue and online sales — rose 19 percent to $775 million from $654 million last year.
Indirect sales — about 12 percent of revenue, primarily from sales to U.S. department stores and international distributors — rose 27 percent to $136 million. That was mainly because of increased orders internationally, but U.S. department store shipments also rose slightly, the company said.
It was the first time Coach reported growth in shipments to U.S. department stores in 2 1/2 years, a positive sign for department stores, one of hardest-hit retail sectors during the recession.
Revenue in North American Coach stores open at least a year rose 8.5 percent. That is a key indicator of a retailer's performance because it excludes growth at stores that open or close during the year.
The measure rose 3 percent in Japan and in the double digits in China.
Revenue in stores open at least a year has strengthened for three consecutive quarters.
The company raised its estimate for revenue in stores open at least one year for the balance of the fiscal year. It now expects the measure to rise in the mid-single digits, up from previous guidance of a low- to mid-single-digit increase.
Coach expects earnings and revenue to rise in the double digits in the current fiscal year.
Shares rose $4.52, or 10.2 percent, to $49.01 during morning trading, its highest point since 2007. The stock had traded between $31.69 and $45.64 over the past 52 weeks.
JUBA, Sudan – A top official in Southern Sudan said Tuesday that officials in Sudan's north are holding an oil-rich area of the country "hostage" in negotiations being held before a January independence referendum.
Pagan Amum, the secretary-general of the south's ruling party, said that southern officials are preparing what he labeled a ransom package in order to break the impasse over the Abyei region, which lies along the north-south faultline.
Southern Sudan and the region of Abyei are both scheduled to hold an independence referendum on Jan. 9 to decide whether they want to remain in a united Sudan or begin a new country in the south. But preparations for the vote are not yet complete, and the north and south haven't agreed on issues like who is eligible to vote in Abyei, as well as oil rights and border demarcation.
Amum said one possibility being examined is having Abyei transferred to southern control by presidential decree in exchange for concessions from the south — which Amum didn't detail — and concessions from the U.S., including the lifting of economic sanctions against Sudan.
Last week in Washington Scott Gration, the U.S. special envoy to Sudan, said President Obama wants better relations with Sudan. Gration said that if the January votes are carried out peacefully, the U.S. could grant Sudan debt relief and remove foreign assistance restrictions and economic sanctions.
"There is no problem with Abyei," said Amum. "Who votes is clear. The land of the Ngok Dinka is clear. ... We are now asking what is it that they want to release Abyei? They have told us that they want something from us and they want something from the Americans."
Officials from Sudan's north and south will soon meet in Ethiopia to continue negotiations surrounding the January votes. An African Union panel will chair the talks.
Whether Khartoum would transfer Abyei to southern control depends on whether the north is happy with the south's package and U.S. offers, Amum said.
MIAMI (Reuters) – In recession-hit Florida, where economic gloom and high unemployment have been central to the November 2 election campaign, the two candidates for governor have been given low marks for not being able to specify the state's minimum wage.
Their ignorance of the exact figure, in a state saddled with the fourth highest jobless rate in the nation, came to light on Monday night during a nationally televised debate between Republican Rick Scott and Democrat Alex Sink.
In the final minutes of the debate, in which the candidates traded some of the sharpest barbs of a campaign that has flooded Florida's airwaves with attack ads, Scott was asked to state the minimum wage in Florida.
The wealthy conservative, who has poured an estimated $60 million of his own money into the campaign, said the rate was $7.55 per hour.
Asked by a moderator if $7.55 was correct, Sink nodded and answered "yes."
Florida's minimum wage is actually $7.25 an hour, in line with the federal minimum wage which last increased in July 2009 when it rose from $6.55 per hour.
"It's very embarrassing. That's going to be headlines all over the state, it's going to be all over talk radio and television," University of South Florida political science professor Susan MacManus told local television, noting both candidates were millionaires.
Neither Scott nor Sink appeared to deliver any knockout punches during the debate and polls have made the contest in Florida, an influential swing state, too close to call.
But both candidates have said repeatedly that jobs in Florida, where unemployment has soared to its highest rate ever and topped 12 percent this year, were key to solving pivotal issues including the mortgage foreclosure crisis clouding the future of the Sunshine State.
Like other Republicans, Scott has sought to make the vote a referendum on what he has branded the failed economic policies of President Barack Obama.
Sink, meanwhile, has tried to cast the spotlight on Scott's leadership of Columbia/HCA, a hospital chain that paid $1.7 billion in fines to settle the largest Medicare fraud case in U.S. history in the late 1990s.
Medicare is the federal health insurance program for the elderly and disabled.
Scott, 57, was never charged in the case and contends he did not know about the fraud during his stewardship of Columbia/HCA as chief executive. He resigned in 1997.
(Editing by Pascal Fletcher and Jerry Norton)