Back in February, I singled out luxury handbag maker Coach, Inc. (NYSE:COH) as one of three stocks any investor could love on Valentine’s Day.
After all, I don’t know many women who don’t already love Coach’s products, and they offer a fantastic alternative for guys who can’t quite afford the more expensive diamond wares from the likes of Tiffany & Co. (NYSE:TIF). Besides, Coach, Inc. (NYSE:COH) stock was still hurting after falling 16% as a result of posting its first earnings miss in 11 quarters.
Last quarter’s perceived weakness
Sure enough, investors were worried that last quarter’s weakness would carry forward, especially considering sales from Coach, Inc. (NYSE:COH)’s core North American market fell by around 2% from the year-ago period. In addition, while Coach did see 40% year-over-year growth in China last quarter, it faced steep competition from rival Michael Kors Holdings Ltd (NYSE:KORS), which, as fellow Fool Dan Caplinger pointed out a few days ago, is becoming especially popular not only in China but also in other key markets shared by both companies.
Even so, the stock was still paying a healthy 2.5% dividend two months ago, and its men’s business continued to put up strong results as it appeared on track to grow sales by around 50% globally in fiscal 2013.
This quarter’s strength
Shares of Coach, Inc. (NYSE:COH) are trading up around 11% this morning — its latest earnings report did much to alleviate stock holders’ fears of prolonged weakness.
For the quarter, overall North American sales increased 7% year over year to $792 million, helped by direct North American sales, which rose 8%, and comparable-store sales, which were up 1%.
International sales rose 6% to $382 million, predictably led by the China market, which maintained its 40% growth rate as comparable-store sales growth stayed in the double-digit range.
What’s more, the men’s business still remains firmly on track to achieve its 50% growth for the year, and Coach reassured skeptical investors that its new footwear lines have been well received by consumers. In addition, thanks to Coach, Inc. (NYSE:COH)’s $928 million in cash and equivalents and no significant debt, management also announced it has reached an agreement to purchase its partner’s 50% interest in Coach’s businesses in the U.K. and Europe, which should provide another boost in earnings down the road.