"While we're well positioned for the holiday season, we arehowever concerned with recent traffic trends in our North Americanretail stores," said Lew Frankfort, chairman and CEO, during aconference call. The traffic "pressure," he told analysts, occurredprimarily in the Northeast; parts of the South, particularlyFlorida, and parts of California."

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Improvements in conversions "offset weak traffic trends," hesaid, adding, "we believe it's prudent to be more conservative." Healso reiterated the company's "overall continuing positive outlook,including the delivery of a 20% revenue gain in this holidayquarter.

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"Our new retail store volumes continue to surpass our initialprojections both in existing markets, such as Glendale, AZ, and innew markets, such as Rochester, MN," said Frankfort. He projectedlow single-digit comp-store sales for the North American retailstores and comps of "at least the mid-teens" for its factory outletstores.

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Fiscal first quarter total sales reached $677 million, comparedwith $529 million for the prior-year quarter. Net income reached$155 million, versus $115 million.

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US comp-store sales increased 19.3%, with retail store sales up10.8% and outlet store sales up 27.3%. Indirect sales, primarilyfrom US department stores, jumped 35%. Direct-to-consumer salesrose 26%. In Japan, sales rose 17% on a constant-currency basis,while dollar sales there rose 15% when adjusted for a weakeryen.

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Coach opened 13 retail stores and three factory stores in NorthAmerica during the quarter and expanded nine stores and four outletunits. As of Sept. 29, it operated 272 retail stores and 96 factoryoutlet units in North America. It also opened four new units andexpanded one in Japan, taking its total in that country to 146.

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Frankfort expressed confidence in the luxury consumer. "Shespends when she shops," he said. For holiday, stores will featurehandbags priced over $400, "our fastest-growing price segment."Stores will also carry jewelry, fragrance and a wide variety ofgifts priced under $100, he added.

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Despite the positive first-quarter performance and Frankfort'sexpression of tempered confidence for holiday, shares of COH fellnearly 12.8% on the NYSE by mid-day, following the conference callto sink to a new 52-week low of $36.30 a share. The previous low of$37.57 a share occurred one day shy of a year ago on Oct. 24, 2006,and the 52-week high was $54 a share on this April 23.

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