October 23, 2012
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.
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