Coach (COH) beat Wall Street estimates as sales in China continue to boom, but shares sold off amid concerns about slowing North American growth.
The luxury handbag and accessories maker said Tuesday that profit rose 24% to 77 cents per share, the third straight quarter of double-digit EPS growth. Analysts expected 75 cents. Sales increased 17% to $1.11 billion, just above estimates of $1.10 billion.
Coach also raised its dividend 33% to $1.20 per share.But shares fell as much as 7.4% intraday, trading down 3% at midday.
North American same-store sales rose 6.7% vs. the year earlier, down from 8.8% in the prior quarter and slightly below some estimates.
That overshadowed strong gains in Asian markets. Coach sees a big opportunity in China, where its handbags are seen as a less-pricey alternative to Gucci, Prada and Hermes, but still with brand cache.
While China still remains a small market, sales jumped 60% and same-store sales, or sales in stores open at least a year, were in the double digits. Five new stores were opened in the thriving market during the quarter, for a total of 85.
Sales rose 10% in Japan, long a big market for Coach's products.
Coach got rid of "couponing," boosting operating margins, according to CEO Lew Frankfort. But that may have hurt sales.
As well as expanding into China, Coach is expanding its product line to include more items for men. The men's business is still on track to double to over $400 million during 2012. The company expects to have its men's line in 100 retail stores in North America.
Tumi (TUMI), a maker of luggage, briefcases and similar goods, had a strong IPO and debut last week.
"We remain confident in our ability to continue to drive sales and earnings at a double-digit pace over our planning horizon," Frankfort said.
The Apparel-clothing manufacturing group is ranked No. 67 out of Investor's Business Daily's 197 industry groups. VF Corp. (VFC), which owns the Timberland, North Face, Wrangler and Lee brands, reports quarterly earnings on Friday.
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