NEW YORK CITY-Leather handbag and accessory retailer Coach Inc. will open 40 stores in North America this year – 10 more than originally planned – and add 10 locations in Japan as the upscale leather goods chain looks to expand its presence in its two strongest markets.

The locally-based company, which opened seven North American retail stores and three factory outlets during the second fiscal quarter of 2007, said the 10 additional stores planned for North America were a result of several multi-store portfolio deals with developers. The firm, which currently has 237 retail stores and 90 factory locations, also opened two retail stores in Japan during the three month period ended Dec. 30.

“Clearly the Coach brand has reached a new level of popularity among North American consumers,” Lew Frankfort, Coach’s chairman and chief executive officer, said in a conference call with analysts.

Frankfort says continued double digit category growth combined with an expanded customer base and strong demand for the firm’s line of accessories, prompted the firm to boost its projected store openings for the year.

“Taken together, these factors point to a much larger market opportunity – in terms of both addressable market size and in terms of share – than we previously contemplated,” Frankfort says.

Coach’s expansion announcement comes as the company, buoyed by strong holiday sales and increased customer demand for its high-end handbags, sent second quarter profits soaring by 31%. Earnings for the quarter were$227.5 million, or 61 cents per share, compared to $174.2 million, or 45 cents per share, in the prior year’s period. Revenue was also up by 29% to $836.4 million.

Management says an expansion of its handbag and accessories lines along with a 25.7% increase in sales at stores opened at least a year and a 34% jump in direct-to-consumer sales, helped boost those numbers. Holiday sales at comparable stores reached their highest level in the company’s public history, Frankfort says. Executives expect earnings of about $1.71 per share in fiscal 2007 based on revenue of $2.63 billion.

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