Coach Q2 profit up 11%

New York City Coach on Wednesday reported a better-than-expected 11% increase in its fiscal second-quarter profit after its North American same-store sales turned positive for the first time in more than a year.

Net income in the quarter, ended Dec. 26, rose to $241 million, from $216.9 million a year earlier. Sales increased to $1.07 billion from $960.3 million.

North American same-store sales rose 3.2%, the first positive sales since the September 2008 quarter, but the number was less than analysts had expected. Retail sales (sales in the company's own stores) rose 14% to $934 million.

“The trend in our domestic business built steadily over the quarter, with December our strongest month, reflecting Coach's position as a gift resource,” said Lew Frankfort, chairman and CEO, Coach. “The most significant comp driver this holiday was conversion, reflecting the vitality of the brand and the strength of our product assortment."

Sales in Japan rose 7% and would have dropped 2% without the boost of a stronger yen. China sales remained "robust," with comparable demand at the consumer level increasing at a double-digit rate, Coach said.

Indirect sales fell 8% to $131 million, hurt by lower shipments to U.S. department stores as Coach controlled inventory in that channel.

During the quarter, the company opened three retail stores and two factory stores in North America, bringing the total to 343 retail stores and 118 factory stores as of Dec. 26. In Japan, Coach opened one shop-in-shop, taking the total to 163 at the end of the quarter. In China, four net new locations were opened during the quarter, taking the total to 37.