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Coach reports higher earnings for Q2

Jan '06
Coach Inc, a leading marketer of modern classic American accessories, has announced an increase of 36 percent in earnings per diluted share before option expense to $0.47 for its second fiscal quarter ended December 31, 2005, up from $0.34 per diluted share a year ago.

In the second quarter, net sales were $650 million, 22 percent higher than the $532 million reported in the same period of the prior year. Net income before option expense rose 36 percent to $183 million, compared with $134 million in the prior year.

Including the impact of stock option expense, net income rose 37 percent to $174 million, or $0.45 per diluted share, compared with $127 million or $0.32 per share in the prior year.

Lew Frankfort, Chairman and Chief Executive Officer of Coach Inc, said, "Our excellent second quarter performance continues to reflect the strength of the Coach franchise, our position as a gift authority and the vibrancy of the U.S. handbag and accessory category. This strength was evidenced throughout all channels of our business and across all geographies, as consumers enthusiastically embraced our holiday assortment. Our profitability improvement highlights our ability to achieve further gross margin expansion and to leverage our expenses as our sales base increases."

During the quarter, gross profit rose 25 percent to $505 million from $403 million a year ago.

Gross margin expanded by 180 basis points from 75.8 percent to 77.6 percent, due to sourcing cost benefits and product mix shifts. SG&A expenses as a percentage of net sales before option expense declined 60 basis points to 33.2 percent, compared to the 33.8 percent reported in the year-ago quarter. Including option expense in both periods, SG&A expenses declined 50 basis points to 35.5 percent of sales from 36 percent in the prior year's second quarter.

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