Amid a weak retail environment, Coach, Inc. (COH), the designer and marketer of fine accessories and gifts, recently reported second-quarter 2010 results that topped Zacks’ expectations.

Coach’s quarterly earnings of 75 cents a share outdid the Zacks Consensus Estimate of 72 cents, and jumped 11.9% from 67 cents delivered in the prior-year quarter. Coach was buoyed by positive comparable-store sales achieved at North American stores, competitive pricing and innovative products, which lured customers in the holiday season.

Total net sales climbed 10.9% year-on-year to $1,065 million, driven by a 16% gain achieved in the North America retail business and strong growth in the China business with a double-digit rate increase in comparable-store sales. Comps at North American stores rose 3.2%, the first increase in over a year.

The rise in sales was a positive indication for the luxury-goods market battered by the economic downturn. Coach, the maker of handbags, wallets, shoes and other accessories, said that it has been lowering prices and introducing new styles to improve sales as consumers cut spending.

Direct-to-consumer sales, which include the company’s China business, jumped 14% to $934 million. In Japan, sales fell 2%, excluding foreign currency translation, but in dollar terms, sales climbed 7% when adjusted for a stronger yen.

Indirect sales dipped 8% to $131 million, due to lower shipments to U.S. department stores as the company stringently managed inventories in that channel. Consequently, the company’s shares fell $2.42, or 6.5%, to $35.03 in pre-market trading.

Gross profit jumped 11.4% to $770.9 million on the heels of double-digit growth in the top-line, which offset a 9.6% increase in cost of sales, whereas the gross profit margin expanded 30 basis points to 72.4%, reflecting changes to key product assortments, and margin improvement in the North American business.

During the quarter, Coach opened three retail stores and two factory stores in North America, taking the total to 343 retail stores and 118 factory stores at the end of the quarter. In Japan, the company opened one location, bringing the total to 163, and in China, four net new locations were opened to take the total to 37.

The company ended the quarter with cash, cash equivalents and short-term investments of $1,103.2 million and total long-term debt of $25.1 million with shareholders’ equity of $1,865.6 million.

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