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Coach's profit lifted by cut backs in discounts

Shoppers pass a Coach display in Macy's, New York.
Scott Mlyn | CNBC
Shoppers pass a Coach display in Macy's, New York.

Coach posted a 17.4 percent rise in quarterly profit as the company cut back on discounts in the United States while selling more handbags in China and Japan.

Coach, whose shares were up 1.9 percent at $36.67 before the opening bell, has limited promotions and pulled out of more than 250 department stores as it tries to win back its premium-brand cachet.

The company's sales at North American stores open at least a year rose 3 percent, its third consecutive quarterly rise, beating analysts' estimate of 2.4 percent, according to research firm Consensus Metrix.

However, the company said it expected revenue in 2017 to rise in the low single-digit range due to a stronger dollar. Coach had previously forecast low to mid-single-digit growth in revenue.

"Coach is executing well," ROE Equity Research analyst Laura Champine told Reuters.

"Revenue guidance is lower solely on foreign exchange shifts, so this is not related to business fundamentals."

The company's net income rose to $199.7 million, or 71 cents per share, in the second quarter ended Dec. 31 from $170.1 million, or 61 cents per share, a year earlier.

Excluding items, Coach earned 75 cents per share. Analysts on average had expected a profit of 74 cents per share, according to Thomson Reuters I/B/E/S.

Net sales rose to $1.32 billion from $1.27 billion, in line with analysts' average estimate.

International sales rose 2.5 percent to $448 million in the quarter, the company said.