TPR Tapestry Inc

By Suzanne Kapner 

Coach Inc. reported its first quarterly sales gain since June 2013, but all credit goes to its recently acquired Stuart Weitzman brand.

Coach's total sales grew 4% to $1.27 billion in the period, and excluding currency fluctuations, sales rose 7%. The company's core Coach brand, which accounts for the bulk of profit and revenue continued to struggle with sales down 3% globally and 7% in North America. But that is an improvement over the same period a year ago, when Coach sales in North America fell 20%.

Its shares rose 9.4% to $33.20 in recent trading, its largest percentage increase in about three years.

After overexpansion and heavy discounting damaged the brand, Chief Executive Victor Luis has scaled back promotions, shut underperforming stores and upgraded design and material quality--efforts that have come as fellow handbag makers Michael Kors Holdings Ltd. and Kate Spade & Co. have similarly struggled with a slowdown in the overall handbag market.

Mr. Luis said that overall, the North American premium women's handbag market didn't grow at all in the December quarter. He added that an increase in the number of units sold was offset by lower average prices given a higher level of promotional activity.

Despite the slowdown in the broader market, Mr. Luis stuck to a previous forecast that sales for the Coach brand would begin to grow in the June quarter, when nearly half of the company's retail stores will have been remodeled.

The money spent to turn around the business has dented profits. Coach earned $170 million in the recent period, down from $184 million, a year earlier. The current figures included $14 million in charges stemming from its strategic shifts. Coach's gross margin slipped to 67.4% from 68.9% a year earlier.

Stuart Weitzman's sales totaled $94 million in the period. Mr. Luis said the brand, which Coach agreed to buy in January 2015, performed above expectations in the holiday period on strong boot sales despite the unusually warm weather.

Coach, meanwhile, continues to see rising sales outside of the U.S. In mainland China, the company logged a double-digit sales increase, despite a slowdown in the world's second-biggest economy that is hurting other American companies. Coach also said it had double-digit sales growth in Europe.

Lisa Beilfuss contributed to this article

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com

(END) Dow Jones Newswires

January 26, 2016 11:43 ET (16:43 GMT)

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