Coach, Inc. (NYSE: COH), a leading marketer of modern classic
American accessories, today reported sales of $951 million for its
fourth fiscal quarter ended July 3, 2010, compared with $778
million reported in the same period of the prior year, an increase
of 22%. Earnings per diluted share totaled $0.64 for the quarter
compared to $0.45 a year ago, an increase of 40%. Net income rose
34% to $196 million from $146 million reported for the prior year.
For the fiscal year, net sales rose 12% to $3.61 billion and net
income increased 18% to $735 million versus the prior fiscal year.
Diluted earnings per share rose 22% to $2.33, versus $1.91 a year
ago.
The company noted that results for the fourth quarter and fiscal
year ending July 3, 2010 included 14 and 53 weeks, respectively,
while the same periods in fiscal 2009 included 13 and 52 weeks,
respectively. The 53rd week contributed about $70 million to 2010
fourth quarter and fiscal year sales and about $0.08 to earnings
per share in both periods. Therefore, excluding the extra week,
sales would have risen 13% for the quarter, while sales for the
year would have been up 10%. Similarly, earnings per share would
have increased 23% for the quarter and 18% for the fiscal year.
Lew Frankfort, Chairman and Chief Executive Officer of Coach,
Inc., said, “I’m very pleased with our fiscal fourth quarter and
full year results. This quarter’s performance demonstrated a
continuation of the resilience we have seen throughout the year, as
our market share expanded across all geographies. Our results
reflect the growing recognition of the Coach brand globally, and
consumers’ strong response to our product offering. It was also a
year of many milestones, including the first full year of direct
operation of our stores in China – where sales at retail doubled -
the opening of our first standalone Men’s stores, and our expansion
into Western Europe, as we laid the groundwork for strong top and
bottom line results in the years ahead.”
For the quarter, operating income totaled $297 million, 45%
above the $205 million reported in the comparable year-ago period,
while operating margin was 31.2% versus 26.3% reported for the
prior year. During the quarter, gross profit rose 27% to $697
million from $547 million a year ago. Gross margin was 73.3% versus
70.4% a year ago, primarily as a result of sourcing cost
improvements. SG&A expenses as a percentage of net sales
totaled 42.1%, compared to the 44.1% reported in the year-ago
quarter.
For the full year, operating income totaled $1.15 billion, 18%
above the $972 million reported in the comparable year ago period,
while operating margin was 31.9% versus 30.1% reported for the
prior year. During the year, gross profit rose 13% to $2.63 billion
from $2.32 billion a year ago. Gross margin was 73.0% versus 71.9%
a year ago. SG&A expenses as a percentage of net sales, totaled
41.1%, compared to the 41.8% reported in fiscal 2009.
It should be noted that during FY09 the company recorded a
number of unusual items which impacted both fourth quarter and full
year results. Excluding the impact of unusual items in the prior
year’s fourth quarter, operating income rose 35% from the $220
million reported in FY09, while operating margin expanded to 31.2%
from 28.2% in the prior year. SG&A expenses as a percentage of
net sales totaled 42.1% in both periods on the same basis. Net
income in the fourth quarter rose 43% from $136 million reported
for the prior year, while earnings per share increased 49% from
$0.43.
Similarly, for the full year, excluding the impact of unusual
items to FY09 results, operating income rose 15% in FY10 from the
$1.00 billion reported for the prior year, while operating margin
expanded 90 basis points to 31.9%. SG&A expenses as a
percentage of net sales, totaled 41.1% compared to 40.9% last year.
Net income in FY10 rose 18% from $622 million reported during the
prior year, while earnings per share increased 22% from $1.91.
The company also announced that during the fourth fiscal
quarter, it repurchased and retired nearly 10.9 million shares of
its common stock at an average cost of $41.43, spending a total of
$450 million. At the end of the period, approximately $560 million
remained under the company’s present repurchase authorization.
Fourth fiscal quarter and full year sales grew in each of
Coach’s primary channels of distribution as follows:
- Direct-to-consumer sales
increased 23% to $842 million in the fourth quarter from $683
million last year. North American same store sales for the quarter
rose 6.3% on a comparable, 14-week versus 14-week basis. In Japan,
sales rose 6% on a constant currency basis, while dollar sales rose
13%, reflecting the stronger yen year-over-year. Excluding the
impact of the extra week, fourth quarter sales at Coach Japan were
even with prior year on a constant currency basis. China results
continued to be robust, with comparable store sales rising at a
double-digit rate.For the full year, direct to consumer sales rose
16% to $3.16 billion from $2.73 billion generated in fiscal 2009.
Overall, North American same store sales for the fiscal year rose
3.5% on a comparable 53-week versus 53-week basis. For the year,
sales in Japan were essentially flat on a constant currency basis,
while dollar sales rose 8%, positively impacted by the exchange
rate. Excluding the impact of the 53rd week, FY10 sales at Coach
Japan were down 2% on a constant currency basis. As in the quarter,
China comparable store sales rose at a double-digit rate.
- Indirect sales increased 15% to
$109 million in the fourth quarter from the $95 million reported
for the prior year driven by international wholesale shipments,
while shipments into U.S. department stores were essentially
consistent with last year’s levels. At POS, international sales
rose significantly while comparable U.S. department store sales
were even year-over-year in the quarter.For the full year, indirect
sales declined 10% to $452 million from $504 million recorded for
fiscal 2009. During the fiscal year, both international sales at
POS and shipments into this channel rose modestly compared to prior
year levels, driven primarily by distribution. U.S. wholesale
shipments and POS sales declined as inventories were tightly
managed.
During the fourth quarter of fiscal 2010, the company opened
five retail stores and closed six others, while opening two factory
stores in North America, bringing the total to 342 retail stores
and 121 factory stores as of July 3, 2010. In Japan, Coach opened
its second Men’s store and a factory store while closing a
shop-in-shop location. Therefore, at the end of the quarter there
were 167 total locations in Japan. There were four net locations
opened in China during the fourth quarter, bringing the total Coach
China locations to 41.
“Our growth this year demonstrates our ability to effectively
navigate a volatile environment by evolving our merchandising,
marketing and pricing strategies. Our performance also reflects the
increasing globalization of the Coach brand, as we strive to
replicate our success formula in emerging markets such as
China.”
“As always, we expect to continue to drive our business through
a combination of productivity gains worldwide and distribution
growth, primarily in new geographies. Clearly, China is our biggest
opportunity, as our brand takes hold and the market continues to
develop rapidly. We’ve started developing a multi-channel
distribution model in China, including retail stores, shop-in-shops
and flagships and expect to accelerate new store openings, with
about 30 new locations planned this year.”
“We’re entering Europe, starting with France, where initial
results in Printemps have been very encouraging. During this fiscal
year, we’ll begin to open stores in the U.K, Portugal and Spain,
starting with first locations in Spain and Portugal this fall, in
El Corte Ingles, as part of our joint venture with Hackett
Limited.”
“Beyond distribution growth, we’re focusing on the Men’s
opportunity, where we’ve been increasing our exposure globally, and
achieving strong early results. We now believe Men’s will be a
significant contributor to top line sales in the seasons and years
ahead.”
“As we enter FY11, we remain confident in our growth prospects
and ability to drive sales and earnings at a double-digit pace,
given the current strength of the Coach business and our increasing
global expansion,” Mr. Frankfort concluded.
Coach will host a conference call to review these results at
8:30 a.m. (EDT) today, August 3, 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. 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 the earnings conference call
will also 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, jewelry, fragrance 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," "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 Years Ended July 3, 2010
and June 27, 2009
(in thousands, except per share
data)
(unaudited)
QUARTER ENDED(1) YEAR ENDED(1)
July 3, June 27, July 3, June 27,
2010 2009 2010 2009 Net sales $
950,525 $ 777,744 $ 3,607,636 $ 3,230,468 Cost of sales
253,526 230,426 973,945 907,858
Gross profit 696,999 547,318 2,633,691 2,322,610 Selling,
general and administrative expenses 400,034 342,631
1,483,520 1,350,697 Operating income 296,965
204,687 1,150,171 971,913 Interest income, net 2,137
2,111 1,757 5,168 Income before
provision for income taxes 299,102 206,798 1,151,928 977,081
Provision for income taxes 103,575 61,005
416,988 353,712 Net income $ 195,527 $ 145,793 $
734,940 $ 623,369 Net income per share Basic $
0.65 $ 0.46 $ 2.36 $ 1.93 Diluted $ 0.64 $ 0.45 $ 2.33 $
1.91 Shares used in computing net income per share
Basic 301,300 317,752 311,413
323,714 Diluted 307,579 320,512 315,848
325,620
(1) Includes 53rd Week in Fiscal
2010
COACH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
For the Quarters Ended July 3, 2010 and June
27, 2009
(in thousands, except per share
data)
(unaudited)
QUARTER ENDED(1) QUARTER ENDED July
3, 2010 June 27, 2009 Total Items Affecting As
Reported As Reported Comparability Excluding
Items Net sales $ 950,525 $ 777,744 $ - $ 777,744
Cost of sales 253,526 230,426 -
230,426 Gross profit 696,999 547,318 - 547,318
Selling, general and administrative expenses 400,034
342,631 15,000 327,631 Operating income
296,965 204,687 (15,000 ) 219,687 Interest income, net
2,137 2,111 2,012 99
Income before provision for income taxes 299,102 206,798 (12,988 )
219,786 Provision for income taxes 103,575
61,005 (22,515 ) 83,520 Net income $ 195,527 $
145,793 $ 9,527 $ 136,266 Net income per share
Basic $ 0.65 $ 0.46 $ 0.03 $ 0.43 Diluted $ 0.64 $
0.45 $ 0.03 $ 0.43 Shares used in computing net income per
share Basic 301,300 317,752 317,752
317,752 Diluted 307,579 320,512
320,512 320,512
(1) Includes 53rd Week in Fiscal
2010
COACH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
For the Years Ended July 3, 2010 and June 27,
2009
(in thousands, except per share
data)
(unaudited)
YEAR ENDED(1) YEAR ENDED July 3,
2010 June 27, 2009 Total Items Affecting As
Reported As Reported Comparability Excluding
Items Net sales $ 3,607,636 $ 3,230,468 $ - $ 3,230,468
Cost of sales 973,945 907,858 -
907,858 Gross profit 2,633,691 2,322,610 - 2,322,610
Selling, general and administrative expenses
1,483,520 1,350,697 28,365 1,322,332
Operating income 1,150,171 971,913 (28,365 ) 1,000,278
Interest income, net 1,757 5,168 2,012
3,156 Income before provision for income taxes
1,151,928 977,081 (26,353 ) 1,003,434 Provision for income
taxes 416,988 353,712 (27,594 ) 381,306
Net income $ 734,940 $ 623,369 $ 1,241 $ 622,128
Net income per share Basic $ 2.36 $ 1.93 $
0.00 $ 1.92 Diluted $ 2.33 $ 1.91 $ 0.00 $ 1.91
Shares used in computing net income per share Basic
311,413 323,714 323,714 323,714
Diluted 315,848 325,620 325,620
325,620
(1) Includes 53rd Week in Fiscal
2010
COACH, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
At July 3, 2010 and June 27,
2009
(in thousands)
(unaudited)
July 3, June 27, 2010 2009
ASSETS Cash, cash equivalents and short term
investments $ 696,398 $ 800,362 Receivables 109,068 108,707
Inventories 363,285 326,148 Other current assets 133,890
161,192 Total current assets 1,302,641 1,396,409
Long term investments 6,000 6,000 Property and equipment,
net 548,474 592,982 Other noncurrent assets 610,000
568,945 Total assets $ 2,467,115 $ 2,564,336
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable
$ 105,569 $ 103,029 Accrued liabilities 422,725 348,619 Revolving
credit facilities - 7,496 Current portion of long-term debt
742 508 Total current liabilities 529,036 459,652
Long-term debt 24,159 25,072 Other liabilities 408,627
383,570 Stockholders' equity 1,505,293
1,696,042 Total liabilities and stockholders' equity $
2,467,115 $ 2,564,336
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