Coach Wins Over 'New Normal' Consumer: CEO
Coach shares reached their highest since 2007 on Tuesday after the luxury retailer trumped analyst expectations, posting 34 percent growth in quarterly earnings. The brand's Chief Executive Officer Lew Frankfort told CNBC that business improved across the board.
"Everything went right for us this quarter," Frankfort said, "We are well-positioned for the holiday [and] it gives us further confident in our roadmap for growth."
North American same-store sales jumped 8.5 percent, while handbag sales grew 20 percent from the same quarter last year. International markets were even stronger, driven by the accelerated expansion efforts in China and a surprising 3 percent sales growth in Japan.
Frankfort says he sees "boundless opportunities" in China, with the 25 store openings this year, and targeting 100 locations in the next two years. The retailer also plans to open more men's stand-alone stores.
Despite the impressive quarter, Frankfort maintains that the consumer is still as cautious and selective as ever. "The consumer is not back," he said. "They have adapted to a new normal."
To cater to this "new normal," Coach focused on expanding its lineup to include less expensive apparel. Instead of discounting existing products, which often runs the risk of cheapening a brand's reputation, Frankfort said they "designed into" new, less pricey products. "We do not go on sale in our stores," he said. "That's a principal we've kept since the beginning."
With rising leather prices and talks of investment spending, however, analysts are keeping an eye on Coach's operating margins in the coming quarters.
Earlier Tuesday, CNBC's Bob Pisani explained why shares of global luxury brands have soared in recent days: From leather goods to fine wines, high-end sales have been magnified by brand awareness overseas, as legacy players spend loads of cash on marketing.
Coach shares closed nearly 12 percent higher, at $49.78 a piece on Tuesday. Get after-hours quote here.
Jewelry retailer Tiffany & Co. saw its shares touch a new 52-week high on Tuesday as well, at $52.88 each.
Shares of Italy-based fashion company Luxottica Group have increased more than 8.5 percent over the past month.