Coach ( COH) reported a 41% jump in second-quarter earnings that beat analysts expectations and raised its forecast for 2005.

The upscale handbag and accessories retailer said profit for the fiscal second quarter ended Jan. 1 rose to $134.1 million, or 69 cents a share, compared with $95.4 million, or 50 cents a share, for the same quarter last year. Analysts were expecting earnings of 68 cents a share, according to consensus estimates reported by Thomson First Call.

"Our profitability improvement highlights our ability to further achieve gross margin expansion and to leverage our expenses as our sales base increases," said the company.

For 2005, the company expects sales of more than $1.66 billion, an increase of at least 26% from the prior year, with earnings per share of at least $1.87. Wall Street analysts on average are expecting $1.84.

During the second quarter, net sales were $531.8 million, up 29% from the $411.5 million reported in the same period of the prior year. Gross profit rose 32% to $403 million from $305 million a year ago. Gross margin expanded by 160 basis points from 74.2% to 75.8%, primarily due to shifts in product and channel mix. Selling expenses as a percentage of net sales declined to 33.8%, a 130-basis point decrease from the 35.1% reported in the year-ago quarter, primarily due to leveraging the higher sales.

The company also announced a 2-for-1 stock split that will raise its shares outstanding to 378 million shares from 189 million. The shares issued as a result of the stock split will be distributed on or about April 4, 2005, to stockholders of record on March 21, 2005.

The company also revealed plans to add nine more U.S. retail stores this Spring, bringing the total to about 20 new stores in fiscal 2005. It will add at least two new locations in Japan during the second half of the year.

Shares of Coach were recently up $1.67, or 3.2%, to $54.49.