Coach, Inc. (NYSE: COH), a leading marketer of modern classic
American accessories, today announced sales of $1.07 billion for
its second fiscal quarter ended December 26, 2009, compared with
$960 million reported in the same period of the prior year, an
increase of 11%. Net income for the quarter totaled $241 million,
with earnings per diluted share of $0.75. This compared to net
income of $217 million and earnings per diluted share of $0.67 in
the prior year’s second quarter.
Lew Frankfort, Chairman and Chief Executive Officer of Coach,
Inc., said, “We were very pleased with the strong sales and
earnings growth we generated this holiday, driven in part by a
return to positive North American comparable store sales. Our
performance reflected continued traction of the initiatives we have
put in place to adapt to the changed environment. Our customers
embraced our innovative and relevant products and collections while
our focus on digital and social media delivered a more engaging
brand experience for many consumers.”
For the second fiscal quarter, operating income totaled $381
million, up 9% from the $348 million reported in the comparable
year ago period, while the operating margin was 35.8% versus 36.3%
reported for the prior year. During the quarter, gross profit
increased 11% to $771 million from $692 million a year ago. Gross
margin was 72.4% versus 72.1% a year ago, reflecting the
re-engineering of key collections globally and margin improvement
in our North American factory business, offset in part by channel
mix. As expected, SG&A expenses as a percentage of net sales
increased to 36.6%, compared to the 35.8% reported in the year-ago
quarter as the company lapped certain significant and unusual
cost-saving items.
The company also announced that during the second fiscal
quarter, it repurchased and retired nearly 8.6 million shares of
its common stock at an average cost of $35.03, spending a total of
$300 million. At the end of the period, $410 million remained under
the company’s repurchase authorization.
For the six months ended December 26, 2009, net sales were $1.83
billion, up 7% from the $1.71 billion reported in the first six
months of fiscal 2009. Net income totaled $382 million, up 5% from
the $363 million reported a year ago, while earnings per share rose
8% to $1.19 from $1.10.
Second fiscal quarter sales results in each of Coach’s primary
channels of distribution were as follows:
- Direct-to-consumer sales
increased 14% to $934 million from $818 million last year. North
American comparable store sales for the quarter rose 3.2%. In
Japan, sales fell 2% on a constant-currency basis, while dollar
sales rose 7% driven by a stronger yen. China sales remained
robust, as POS sales continued to comp at a double-digit rate.
- Indirect sales decreased 8% to
$131 million in the second quarter from the $143 million reported
for the prior year. 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 sales levels at
POS. International POS sales rose during the period, notably in
locations focused on the domestic consumer.
During the second quarter of fiscal 2010, the company opened
three retail stores and two factory stores in North America,
bringing the total to 343 retail stores and 118 factory stores as
of December 26, 2009. In Japan, Coach opened one shop-in-shop,
taking the total to 163 at the end of the quarter. In China, four
net new locations were opened during the quarter, taking the total
to 37.
Mr. Frankfort continued, “Our pricing and product initiatives
have resonated with our consumer base, both here in North America
and internationally. The response to Madison and Poppy, our lead
collections for holiday, was strong, as was the reaction to our
holiday gifting and marketing campaigns which built on our
successes from the prior quarter. For early spring, we’re excited
about the new Peyton collection, which launched on December 26th,
and is off to a great start. And later this week, we’re
re-launching Poppy, featuring new styles and a fresh color
palette.”
“We were especially pleased by the strengthening of our North
America retail business during the holiday season, as revenues from
new and existing stores increased by 16% and comparable store sales
rose 3%. The trend in our domestic business built steadily over the
quarter, with December our strongest month, reflecting Coach’s
position as a gift resource. The most significant comp driver this
holiday was conversion, reflecting the vitality of the brand and
the strength of our product assortment.”
“Our holiday results bode well for the future. Despite the
challenging retail environment, we’re confident that we’ll continue
to deliver healthy sales and earnings growth over the balance of
the fiscal year. We’re well positioned for the ‘new normal’, and
expect to further expand our North American market share,
irrespective of category growth. We will leverage the abundant
growth opportunities available to us both domestically and
internationally, as we become an increasingly global brand,” Mr.
Frankfort concluded.
Coach will host a conference call to review second fiscal
quarter results at 8:30 a.m. (ET) today, January 20, 2010.
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 and Six
Months Ended December 26, 2009 and December 27, 2008
(in thousands, except per share
data)
(unaudited)
QUARTER
ENDED SIX MONTHS ENDED December 26, December
27, December 26, December 27, 2009
2008 2009 2008 Net sales $
1,065,005 $ 960,256 $ 1,826,442 $ 1,712,785 Cost of sales
294,066 268,220 505,325 462,556
Gross profit 770,939 692,036 1,321,117 1,250,229
Selling, general and administrative expenses 390,102
343,673 717,033 668,380 Operating
income 380,837 348,363 604,084 581,849 Interest income
(expense), net 112 532 (484 ) 3,178
Income before provision for income taxes 380,949 348,895
603,600 585,027 Provision for income taxes 139,999
131,989 221,823 222,310
Net income $ 240,950 $ 216,906 $ 381,777
$ 362,717 Net income per share Basic $
0.76 $ 0.67 $ 1.20 $ 1.11 Diluted $ 0.75 $ 0.67 $ 1.19 $
1.10 Shares used in computing net income per share
Basic 317,458 323,655 317,761
327,881 Diluted 321,381 325,168
321,137 329,716
COACH, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
At December 26, 2009, June 27, 2009 and
December 27, 2008
(in thousands)
(unaudited)
December
26, June 27, December 27, 2009 2009
2008 ASSETS Cash, cash equivalents and short
term investments $ 1,103,177 $ 800,362 $ 424,153 Receivables
178,849 108,707 192,024 Inventories 269,200 326,148 383,081 Other
current assets 165,166 161,192 221,579
Total current assets 1,716,392 1,396,409 1,220,837 Long term
investments 6,000 6,000 6,000 Property and equipment, net 564,483
592,982 600,437 Other noncurrent assets 582,255
568,945 510,687 Total assets $ 2,869,130 $ 2,564,336
$ 2,337,961
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 120,167 $ 103,029 $ 125,650 Accrued
liabilities 457,557 348,619 391,260 Revolving credit facilities -
7,496 1,896 Current portion of long-term debt 737 508
503 Total current liabilities 578,461 459,652 519,309
Long-term debt 24,339 25,072 25,076 Other liabilities
400,764 383,570 327,565 Stockholders' equity
1,865,566 1,696,042 1,466,011 Total
liabilities and stockholders' equity $ 2,869,130 $ 2,564,336 $
2,337,961
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