Coach Sales Rise with Help from Lower-Priced Line

Coach Inc.‘s fiscal first-quarter profit fell slightly, but revenue rose as new, lower-priced handbag lines helped juice sales.

The company blamed heavy promotions spurred by the recession-fueled consumer pullback for its thinner profit margins. But the sales increase was an encouraging sign for a luxury-goods market that has suffered.

The New York maker of luxury accessories on Tuesday said first-quarter profit fell 3 percent to $140.8 million, or 44 cents per share from $145.8 million, a year earlier. Per-share results were the same in both periods.

Revenue rose 1 percent to $761.4 million, helped by an 8 percent rise in sales at North American stores and growing business in China.

Analysts expected profit of 39 cents per share on revenue of $753.8 million.

Many luxury goods makers have had to cut prices or introduce new, lower-priced products to keep buyers interested, as the recession has led even the wealthy to cut spending.

About 50 percent of Coach’s handbags are now priced under $300, compared with 30 percent a year ago.

Coach cited the success of its Poppy collection, a lower-priced line of handbags, shoes and other accessories targeted at younger customers. It launched the line in July.

“For over a year we have been addressing the very weak retail climate in the U.S. and abroad,” Chairman and CEO Lew Frankfort said in a statement. “We have adapted our pricing and product strategies to be successful in what will become the ‘new normal.’ “

Coach’s direct-to-consumer business, which includes sales in China, rose 10 percent to $654 million. Sales at Chinese stores open at least a year rose at a double-digit rate, the company said.

Coach shares rose 49 cents to $35 in premarket trading.

10/20/2009 8:23 AM NEW YORK (AP)