(A luxury obsessed consumer. Picture courtesy of Racked.com)

Coach reported better than expected profits today. Net income rose to $303.4 million, or $1 a share up from $241 million or 75 cents in 2Q of last year. Sales rose 19% to $1.26 billion and the company expects sales and profit to increase at least 10% through 2011. In addition, Coach plans to repurchase close to $1.5 billion of shares by June 30th, 2013.

With those kind of numbers it's hard not to seriously wonder if the luxury retailers are finally back. Or is it?

Mike Tucci president of Coach's North American retail division credits three main reasons for strong sales during the holiday season: product performance, digital strategy and progress on the new mens intiative. Tucci specifically notes Coach.com is the fastest growing full price channel in North America and experienced double digit growth during the holiday season. "We will continue to use digital capability as a touch point for the customers," he said on the earnings call. So what are some of the pitfalls for Coach? For one, gross margin estimates missed the street's expectations coming in at 72.4% compared to 73.2% due mostly in part by an increase in sales at their lower priced outlet stores. Second, Coach's market share in Japan continues to contract. But, with expanding market share in China (Frankfort referred to China as "our fastest growing business.") and a potential move of production to lower labor cost countries such as India, Coach may still see some bright days ahead in 2011.

Coach wasn't the only luxury retailer to report stellar earnings supported by significant growth in China. Burberry reported a 36 percent increase in sales reflecting the deal to take over 50 stores from the retailer's Chinese franchise partner. Likewise, the new "digitally enhanced" flagship store in Beijing drove significant traffic. "There is an underlying growth in the Chinese luxury sector anyway, but the main driver has been making sure our stores are properly stocked," said Stacey Cartwright, chief financial officer. "Previously, lean levels of inventory meant a lot of sales were walking out the door."

Luxury conglomerate Richemont reported a 7 percent increase in sales (omitting currency fluctuations) to $2.29 billion beating analysts estimates. The Asia-Pacific region accounted for 31 percent of Richemont's sales during the quarter.

It's difficult to ignore numbers like that especially when Consumer Confidence Index rose 7.3 points to 60.6. Feeling better about the economy mixed with a little "frugal fatigue" may be the exact combination luxury retailers need in order to have a full recovery. With that said, there is a Chloe handbag AND a pair Christian Louboutin heels that I've been eyeing for months now. 18 months to be exact.

Men's Spring 2011, Burton to Take Over at McQueen, Richemont Profits Fall, Theyskens New to Theory, Gaultier Leaves Hermes, AEO Profits Fall and Everyone is Over Sex and the City 2.

A Change in Seasons in Men's Suits

"For spring 2011, suit vendors are once more celebrating American heritage by featuring the khaki suit as the ultimate ensemble for the season. Look for cotton suits and separates in a multitude of khaki shades in cropped silhouettes and softly constructed blazers."

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(wwd)Burton to Be Named Creative Director at McQueen

"Sarah Burton, the late Alexander McQueen’s trusted colleague, is set to be named creative director of the London-based fashion house, WWD has learned. Burton worked alongside McQueen on his women’s wear collection for more than a dozen years, and completed the fall collection after the designer’s suicide in February. Burton’s appointment should further solidify the future of the company. Shortly after McQueen’s death, Gucci Group vowed to keep the company open, saying the designer had set the “building blocks of a brand” that would allow the business to continue. However, Robert Polet, Gucci Group president and chief executive officer, declined to comment on any succession plan at the time."

(wwd)Richemont Sales, Profits Decline in Year

"Sales and profits may have declined last year at Compagnie Financiere Richemont SA, parent of brands including Cartier and Dunhill, but Johann Rupert, Richemont’s executive chairman and chief executive officer is decidedly optimistic about the next 12 months. On Thursday, the company said profits in the year to March 31 fell 18 percent to 603 million euro, or $850 million, due chiefly to currency translation losses on net financial assets. Sales, meanwhile, fell 4.5 percent to 5.18 billion euro, or $7.3 billion, due to a decline in spending worldwide and lower inventory levels during the recession." read more

(boston.com)A genre that's out of fashion

"After more than a decade of Patricia Field-designed costumes for films and TV series, the genre has been wrung out, like the last of Samantha Jones’s delicates on wash day. Which makes the arrival of “Sex and the City 2’’ perhaps the most anticlimactic sequel of the summer, and the reason I won’t be queued up tonight to see it alongside the ladies who smell of cranberry juice, vodka, and Sarah Jessica Parker’s Lovely Moments perfume. Didn’t everyone’s dreams already come true in the first film?" read more

(wwd)Olivier Theyskens to Design for Theory

"Theory is bringing Olivier Theyskens back to fashion. Theyskens will design a women's capsule collection for the contemporary brand, which will bow for the spring-summer 2011 season. For Theyskens, one of the most revered designers, it will mark a return to fashion after stints at Rochas and Nina Ricci. Further details were unavailable at presstime." read more

(businessweek)Hermes Says Jean-Paul Gaultier to Quit Fashion House

"French fashion designer Jean-Paul Gaultier will step down as the artistic director of Hermes International SCA’s women’s ready-to-wear unit after seven years in the role. The 58-year-old French couturier, best known for designing the cone bra worn by singer Madonna on her 1990 Blond Ambition tour, will be replaced by Christophe Lemaire, Hermes said today in a statement. The spring-summer 2011 collection to be presented in October will be the last one created by Gaultier for Hermes. Gaultier’s exit marks the end of a formal arrangement that began when Jean-Louis Dumas, former president and chief executive officer of Hermes, signed the designer up to bring new blood to the maker of luxury handbags and silk ties. Dumas died this month at the age of 72." read more

(wwd)AEO Profits Fall in First Quarter

"American Eagle Outfitters Inc. flew into pockets of turbulence in the first quarter, cutting profits in half, and said Wednesday it expects more choppy skies ahead. While heavy discounting and the cost of closing the Martin + Osa division took their toll on first-quarter results, a second-quarter earnings projection slightly below analysts’ expectations played a larger role in dropping shares of the Pittsburgh-based teen specialty retailer $2.57, or 16.7 percent, to $12.81. For the 13 weeks ended May 1, net income totaled $10.9 million, or 5 cents a share, compared with $22 million, or 11 cents, a year earlier. Stripping out charges from the closure of the 28-door Martin + Osa chain, adjusted profits amounted to 17 cents a share, matching analysts’ estimates." read more

Is luxury back? Coach beats estimates with 2Q earnings

The Style File Daily Cheat Sheet