Why Coach Shares Popped

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What: Shares of women's handbag and accessory-maker Coach (NYSE: COH ) climbed as much as 10% before finishing the day with a 7% gain on a strong earnings report.

So what: Boosted by sales in China, which grew nearly 40%, Coach posted EPS of $0.77 a share, up from $0.73 a share a year ago, while sales jumped 11% to $1.16 billion. Margins took a hit because of the company's attempt to buy local distributors in Asia. The earnings figure beat Wall Street's view by a penny, while revenue matched. Same-stores sales, meanwhile, climbed 5.5% and North American sales bounced back after sluggish growth earlier in the year.

Now what: Shares of Coach are still down more than 25% from 52-week highs it reached in the spring, as luxury retailers have struggled amid the global slowdown. Today's report should help reaffirm the retailer's brand strength, and for investors, it looks affordably priced at a P/E of 16. With its culture of conspicuous consumption and booming middle class, China should continue to tell the tale for the bag maker in the future. Keep an eye in growth in the world's No. 2 economy over the coming quarters. If Coach can keep putting up growth numbers in the 40% range, the stock should continue point upwards.

Stay up to date on the latest trends with Coach by adding Coach to My Watchlist.

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Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool owns shares of Coach. Motley Fool newsletter services recommend Coach. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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