Coach Inc owes China for its revenue’s hike

American handbag designer Coach Inc. announced on Tuesday that its fiscal first-quarter international sales revenue up dramatically, driven mainly by gains in the Chinese market. Coach’s sales revenue in the quarter

 ended Sept 29 rose by 11 percent to 1.16 billion dollars, compared to the 1.05 billion dollars it achieved a year earlier.

“They gave up some upside on the margin to fuel sales,” Liz Dunn, an analyst with Macquarie Group in New York, said to Bloomberg. “They managed expenses better than we thought they would. I think they did the balancing act well,” Dunn, who recommends buying the shares, added.

Gross margin, the share of sales left after subtracting the cost of goods sold, was unchanged at 72.8 percent, Coach said. Analysts asked by Bloomberg estimated 73 percent, on average.

In the same vein, the quarterly earnings of 77 cents a share beat the Zacks Consensus Estimate by a couple of cents, and increased 6 percent from 73 cents earned in the prior-year quarter buoyed by strong top-line growth on the back of healthy comparable-stores sales across North America and China, they pointed out in a note to investors.

“The New York-based Coach said that net sales for the quarter came in at 1,161.4 million dollars, up 11 percent from the year-ago quarter, and came ahead of the Zacks Consensus Estimate of 1,159 million dollars.”

Its shares rose 7.2 percent on Tuesday after its fiscal first-quarter profit topped Wall Street expectations and the company plans to buy back up to 1.5 billion dollars of shares.

International sales – those registered outside of North America - increased by 15 percent to 362 million dollars, that is from 314 million dollar last year. The Chinese market remained strong, with its total sales up by nearly 40 percent.

Coach said earlier this year that fiscal 2013 will be an investment year in which it will accelerate the acquisition of domestic-retail operations in key Asian markets. Sticking to the plans, the luxury handbag maker has already acquired the domestic retail Coach businesses in Malaysia and South Korea during the first quarter.

Lew Frankfort, chairman and chief executive officer of Coach Inc, said he is pleased with the results, which is "highlighted by double-digit top line growth, with strong comparable stores sales – most notably in North America and China." Coach completed the acquisition of domestic distributors in South Korea and Malaysia during this quarter, reminded the company at its report release.