Coach, Inc. (NYSE: COH), a leading marketer of modern classic
American accessories, today reported sales of $761 million for its
first fiscal quarter ended September 26, 2009, compared with $753
million reported in the same period of the prior year, an increase
of 1%. Net income for the quarter totaled $141 million, with
earnings per diluted share of $0.44. This compared to net income of
$146 million and earnings per diluted share of $0.44 in the prior
year’s first quarter.
Lew Frankfort, Chairman and Chief Executive Officer of Coach,
Inc., said, “We experienced sequential improvement in our North
American retail business this quarter, as the initiatives put into
place earlier this year proved successful. Specifically, Coach
benefited from the well received launch of the Poppy collection and
other products at particularly compelling prices. We achieved a
solid quarterly top-line performance; with North American stores
generating an 8% overall gain on a 1% decline in comparable store
sales. At the same time, we were very pleased to achieve earnings
per share that matched the prior year with excellent operating
margins.”
For the quarter, operating income totaled $223 million, 4% below
the $233 million reported in the comparable year-ago period, while
operating margin was 29.3% versus 31.0% reported for the prior
year. During the quarter, gross profit declined 1% to $550 million
from $558 million a year ago. Gross margin was 72.3% versus 74.2% a
year ago, impacted as expected by both the continued promotional
environment and channel mix. SG&A expenses as a percentage of
net sales totaled 42.9%, as compared to 43.1% reported in the
year-ago quarter.
First fiscal quarter sales results in each of Coach’s primary
channels of distribution were as follows:
- Direct-to-consumer sales, which
now include our China business, increased 10% to $654 million from
$592 million last year. North American comparable store sales for
the quarter declined 1.1%. In Japan, sales declined 3% on a
constant-currency basis, while dollar sales rose 11%, adjusted for
a stronger yen. China results continued very strong, with
comparable store sales rising at a double-digit rate.
- Indirect sales decreased 33% to
$108 million in the first quarter from the $160 million reported
for the prior year on a comparable basis. This decline was
primarily due to reduced shipments into U.S. department stores, as
the company continues to tightly manage inventories in that channel
given softer sales at POS than last year. International POS sales
posted gains in the period, driven by distribution and comparable
location sales gains.
During the first quarter of fiscal 2010 in North America the
company opened 10 retail stores – including eight in new markets
for Coach - and five factory stores, bringing the total to 340
retail stores and 116 factory stores as of September 26, 2009. In
Japan, Coach opened two locations, taking the total to 162 at the
end of the quarter. In China, 5 net new locations were opened
during the quarter, taking the total to 33.
Mr. Frankfort continued, “The launch of Poppy in July, along
with our new pricing strategy, which gives the consumer more
choices at prices she is willing to pay or is able to afford,
resulted in an increased sales penetration of handbags. We also
benefited from a sequential improvement in traffic fueled by Poppy,
which was supported by comprehensive marketing programs at its
launch. Importantly, the product introductions that followed over
the quarter, were also well received. Earlier this month, we
started flowing in our holiday assortment, including a relaunch of
the Madison collection and new Poppy styles and fabrics.
“We’re also extremely enthusiastic about the response to Coach
in China, where we are continuing to experience rapid growth for
both Coach and the imported accessory category. We’re also pleased
to announce the opening of our first Mainland China flagship store,
planned for Spring 2010 in Shanghai. The 7,000 square foot store
will reflect Coach’s latest global flagship design. To support our
growth in China, we are also planning to open an Asia distribution
center, also in Shanghai, before the end of our fiscal year,
allowing us to better manage the logistics in this rapidly growing
region for Coach.”
“For over a year we have been addressing the very weak retail
climate in the U.S. and abroad. We have adapted our pricing and
product strategies to be successful in what will become the ‘new
normal’ by rebalancing our assortments and introducing Poppy, a
youthful lifestyle collection, which instantly became one of our
major platforms. While we continue to plan conservatively, we
believe that we’re well positioned for the seasons ahead. We’re
also squarely focused on the abundant growth opportunities
available to us as we begin to emerge from this downturn,” Mr.
Frankfort concluded.
Coach will host a conference call to review first fiscal quarter
results at 8:00 a.m. (ET) today, October 20, 2009. Interested
parties may listen to the webcast by accessing www.coach.com/investors on the Internet
or dialing into 1-888-405-2080 and asking for the Coach earnings
call led by Andrea Shaw Resnick, SVP of Investor Relations &
Corporate Communications. A telephone replay will be available
starting at 12:00 noon today, for a period of five business days.
The number to call is 1-866-352-7723. A webcast replay of this call
will be available for five business days on the Coach website.
Coach, with headquarters in New York, is a leading American
marketer of fine accessories and gifts for women and men, including
handbags, women’s and men’s small leathergoods, business cases,
weekend and travel accessories, footwear, watches, outerwear,
scarves, sunwear, fragrance, jewelry and related accessories. Coach
is sold worldwide through Coach stores, select department stores
and specialty stores, through the Coach catalog in the U.S. by
calling 1-800-223-8647 and through Coach’s website at
www.coach.com. Coach’s shares are traded on the New York Stock
Exchange under the symbol COH.
This press release contains forward-looking statements based on
management's current expectations. These statements can be
identified by the use of forward-looking terminology such as "may,"
"will," "should," "expect," "intend," "estimate," "are positioned
to," "continue," "project," "guidance," “target,” "forecast,"
"anticipated," or comparable terms. Future results may differ
materially from management's current expectations, based upon risks
and uncertainties such as expected economic trends, the ability to
anticipate consumer preferences, the ability to control costs, etc.
Please refer to Coach’s latest Annual Report on Form 10-K for a
complete list of risk factors.
COACH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
For the Quarters Ended September 26, 2009 and
September 27, 2008
(in thousands, except per share
data)
(unaudited)
QUARTER ENDED
September 26, September 27, 2009 2008
Net sales $ 761,437 $ 752,529 Cost of sales
211,259 194,336 Gross profit 550,178 558,193
Selling, general and administrative expenses 326,931
324,707 Operating income 223,247 233,486
Interest (expense) income, net (596 ) 2,646
Income before provision for income taxes and discontinued
operations 222,651 236,132 Provision for income taxes
81,824 90,321 Net income $
140,827 $ 145,811 Net income per share
Basic $ 0.44 $ 0.44 Diluted $ 0.44 $ 0.44
Shares used in computing net income per share Basic
318,286 331,865 Diluted 321,115
334,023
COACH, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
At September 26, 2009, June 27, 2009 and
September 27, 2008
(in thousands)
(unaudited)
September 26, June 27, September 27,
2009 2009 2008 ASSETS Cash, cash
equivalents and short term investments $ 994,680 $ 800,362 $
409,510 Receivables 105,120 108,707 156,478 Inventories 337,545
326,148 401,797 Other current assets 173,128
161,192 243,313 Total current assets 1,610,473
1,396,409 1,211,098 Long term investments 6,000 6,000 8,000
Property and equipment, net 582,230 592,982 464,885 Other
noncurrent assets 595,913 568,945
426,929 Total assets $ 2,794,616 $ 2,564,336 $
2,110,912
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 94,198 $ 103,029 $ 129,491 Accrued liabilities
437,259 348,619 331,114 Current portion of long-term debt
704 8,004 335 Total current liabilities
532,161 459,652 460,940 Long-term debt 24,429 25,072 2,245
Other liabilities 397,045 383,570 296,691 Stockholders'
equity 1,840,981 1,696,042 1,351,036
Total liabilities and stockholders' equity $ 2,794,616 $
2,564,336 $ 2,110,912
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