Coach, Inc. (NYSE: COH), a leading marketer of modern classic
American accessories, today reported sales of $1.03 billion for its
fourth fiscal quarter ended July 2, 2011, an increase of 17% from
the same period the prior year on a comparable, non-GAAP basis –
excluding the 14th week from the fourth quarter of fiscal 2010.
Similarly, net income rose 18% to $202 million and diluted earnings
per share increased 22% to $0.68. On a reported basis, sales rose
9%, net income rose 4% and earnings per share gained 7%.
For the fiscal year, on a comparable, non-GAAP basis - excluding
the 53rd week in fiscal 2010 - net sales rose 18% to $4.16 billion
and net income increased 24% to $881 million versus the prior
fiscal year. In addition, diluted earnings per share rose 30% to
$2.92. On a reported basis, sales rose 15%, net income gained 20%
and earnings per share increased 26% from fiscal 2010.
Results for the fourth quarter and fiscal year ended July 2,
2011 included 13 and 52 weeks, respectively, while the same periods
in fiscal 2010 included 14 and 53 weeks, respectively. As noted at
the time, the 53rd week contributed about $70 million to 2010
fourth quarter and fiscal year sales, $24 million to net income and
about $0.08 to earnings per share in both periods. In addition,
during the third quarter of fiscal 2011, the company recorded
certain unusual items. They included a favorable settlement of a
multi-year tax return examination, which resulted in a
substantially lower third quarter tax rate of 26.5%, and which
decreased Coach’s provision for taxes by $16 million. In addition,
the company made contributions of $21 million to the Coach
Foundation, and $5 million to the Japanese Red Cross, respectively.
Together these contributions totaled nearly $26 million pre-tax,
impacting SG&A expenses by that amount, and precisely
offsetting the benefit of the tax settlement to net income and
earnings per share.
Lew Frankfort, Chairman and Chief Executive Officer of Coach,
Inc., said, “I’m extremely pleased with our fiscal fourth quarter
and full year results. We’re continuing to drive sales through
higher productivity and distribution expansion, globally. In North
America, where revenues grew 17% for the quarter and the fiscal
year on a comparable basis, we are increasing our share of a
growing accessories market. At the same time, the contribution of
our international businesses in China and other East Asian markets
is accelerating. Our strong performance also reflects the success
of our renewed focus on Men’s – drawing on our long heritage in the
category – and our digital strategies, as we continue to build the
foundation for strong top and bottom line results in the years
ahead.”
For the quarter, operating income totaled $312 million, 5% above
the $297 million reported in the year-ago period, while operating
margin was 30.3% versus 31.2% reported for the prior year. During
the quarter, gross profit rose 6% to $740 million from $697 million
reported a year ago while gross margin was 71.8% versus 73.3%.
SG&A expenses, as a percentage of net sales, totaled 41.5%,
compared to the 42.1% reported in the year-ago quarter.
For the full year, operating income totaled $1.30 billion, 14%
above the $1.15 billion reported in the year ago period, while
operating margin was 31.4% versus 31.9% for the prior year. During
the year, gross profit rose 15% to $3.02 billion from $2.63 billion
a year ago. Gross margin was 72.7% versus 73.0% a year ago.
SG&A expenses, as a percentage of net sales, totaled 41.3%,
compared to the 41.1% reported in fiscal 2010.
The company also announced that during the fourth fiscal
quarter, it repurchased and retired about 6.3 million shares of its
common stock at an average cost of $60.08, spending a total of $381
million. At the end of the period, approximately $962 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 18%
on a comparable basis and 9% on a reported basis, to $919 million
in the fourth quarter from $842 million last year. North American
same store sales for the quarter rose 10.1% on a comparable basis.
Excluding the extra week in the year-ago period, sales at Coach
Japan were down 7% versus prior year in constant currency and rose
6% in dollars, impacted by the after effects of the earthquake and
tsunami. On a reported basis, Coach Japan sales declined 13% in
constant currency, while dollar sales declined 2%, reflecting the
stronger yen year-over-year. China results continued to be
exceptional with same store sales rising at a double-digit rate.For
the full year, direct to consumer sales rose 17% on a comparable
basis and 15% as reported, to $3.62 billion from $3.16 billion
generated in fiscal 2010. Overall, North American same store sales
for the fiscal year rose 10.6% on a comparable basis. Excluding the
impact of the 53rd week in the prior year, fiscal 2011 sales at
Coach Japan were down 3% in constant currency and up 7% in dollars.
On a reported basis, sales in Japan declined 5% in constant
currency basis, while dollar sales rose 5%, positively impacted by
the exchange rate. As in the quarter, the strong performance in
China was driven by both new store openings and double-digit
increases in same store sales.
- Indirect sales increased 12% on a
comparable basis and 4% as reported, to $113 million in the fourth
quarter from the $109 million reported in the prior year driven by
both international wholesale shipments and shipments into U.S.
department stores. At POS, international sales rose significantly
while U.S. department store sales also increased on a
year-over-year basis in the quarter.For the full year, indirect
sales rose 21% on a comparable basis and 19% as reported, to $537
million from $452 million recorded for fiscal 2010. During the
fiscal year, both international sales at POS and shipments into
this channel rose significantly compared to prior year levels,
driven by both distribution and same location sales. U.S. wholesale
shipments and POS sales at U.S. department stores also rose.
During the fourth quarter of fiscal 2011, the company opened
three North American retail stores – including the first Men’s mall
store at Copley Plaza - and closed two others, while opening nine
factory stores – including six dedicated Men’s stores. This brought
the total to 345 retail stores and 143 factory stores in North
America as of July 2, 2011. In Japan, Coach opened a shop-in-shop
location and a Men’s factory location. Therefore, at the end of the
quarter there were 176 total locations in Japan. There were 11 new
locations opened in China during the fourth quarter, bringing the
total Coach China locations to 66.
“As always, we expect to continue to drive our business through
a combination of productivity gains worldwide and distribution
growth, both in North America as well as internationally, where
China remains our biggest opportunity. We’re also pleased to
announce the transition of Singapore to a direct business, with
Malaysia planned to occur at the end of this fiscal year. In
addition, we have recently signed distribution deals for Brazil and
Vietnam, with the first openings targeted for late this calendar
year.”
“Beyond expansion, we’re leveraging the Men’s opportunity, where
we’ve been increasing our exposure globally through both dedicated
Men’s locations and dual-gender stores. Results have been strong,
with the business doubling in fiscal 2011, underscoring our belief
that Men’s will be a significant contributor to our performance in
the seasons and years ahead.”
“Entering fiscal 2012, we remain confident in our growth
prospects and ability to drive sales and earnings per share 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 2, 2011. 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 2, 2011 and July 3, 2010
(in thousands,
except per share data)
(unaudited)
Quarter Ended(1) Year
Ended(1) July 2, 2011 July 3,
2010(2) July 2, 2011 July 3,
2010(2) Net sales $ 1,031,675 $ 950,525 $
4,158,507 $ 3,607,636 Cost of sales 291,136 253,526
1,134,966 973,945 Gross profit 740,539 696,999 3,023,541
2,633,691
Selling, general and administrative
expenses
428,447 400,034 1,718,617 1,483,520 Operating income 312,092
296,965 1,304,924 1,150,171 Interest income, net 261 2,196
1,031 7,961 Other expense (1,668) - (4,736) - Income
before provision for income taxes 310,685 299,161 1,301,219
1,158,132 Provision for income taxes 108,204 103,634 420,419
423,192 Net income $ 202,481 $ 195,527 $ 880,800 $ 734,940
Net income per share Basic $ 0.70 $ 0.65 $ 2.99 $
2.36 Diluted $ 0.68 $ 0.64 $ 2.92 $ 2.33
Shares used in computing net income per
share
Basic 291,163 301,300 294,877 311,413 Diluted 298,722
307,579 301,558 315,848 (1) Includes 53rd Week in Fiscal
2010
(2) Amounts presented differ from amounts
previously reported due to change in income statement
classification. On July 4, 2010, the Company changed its income
statement classification for interest and penalties recognized for
uncertain tax positions, codified within the Accounting Standards
Codification Topic 740, from Interest income, net to the Provision
for income taxes.
COACH,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
For the Years
Ended July 2, 2011 and July 3, 2010
(in thousands,
except per share data)
(unaudited)
Year Ended(1) July 2,
2011 July 3, 2010(2) GAAP Basis Total
Items Affecting Non-GAAP Basis (As Reported)
Comparability(3) (Excluding Items) As
Reported Net sales $ 4,158,507 $ - $ 4,158,507 $
3,607,636 Cost of sales 1,134,966 - 1,134,966 973,945
Gross profit 3,023,541 - 3,023,541 2,633,691
Selling, general and administrative
expenses
1,718,617 25,678 1,692,939 1,483,520 Operating income
1,304,924 (25,678) 1,330,602 1,150,171 Interest income, net
1,031 - 1,031 7,961 Other expense (4,736) - (4,736) -
Income before provision for income taxes 1,301,219 (25,678)
1,326,897 1,158,132 Provision for income taxes 420,419
(25,678) 446,097 423,192 Net income $ 880,800 $ 0 $ 880,800
$ 734,940 Net income per share Basic $ 2.99 $ 0.00 $
2.99 $ 2.36 Diluted $ 2.92 $ 0.00 $ 2.92 $ 2.33
Shares used in computing net income per
share
Basic 294,877 294,877 294,877 311,413 Diluted 301,558
301,558 301,558 315,848 (1) Includes 53rd Week in Fiscal
2010
(2) Amounts presented differ from amounts
previously reported due to change in income statement
classification. On July 4, 2010, the Company changed its income
statement classification for interest and penalties recognized for
uncertain tax positions, codified within the Accounting Standards
Codification Topic 740, from Interest income, net to the Provision
for income taxes.
(3) During the third quarter of Fiscal
2011, the Company realized a favorable tax settlement of a
multi-year tax return examination and made contributions to the
Coach Foundation and the Japanese Red Cross.
COACH,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
At July 2, 2011
and July 3, 2010
(in
thousands)
(unaudited)
July 2, July 3, 2011 2010
ASSETS Cash, cash equivalents and short term
investments $ 702,038 $ 696,398 Receivables 142,898 109,068
Inventories 421,831 363,285 Other current assets 185,621 133,890
Total current assets 1,452,388 1,302,641 Property and
equipment, net 582,348 548,474 Other noncurrent assets 600,380
616,000 Total assets $ 2,635,116 $ 2,467,115
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable
$ 118,612 $ 105,569 Accrued liabilities 473,610 422,725 Current
portion of long-term debt 795 742 Total current liabilities
593,017 529,036 Long-term debt 23,360 24,159 Other
liabilities 406,170 408,627 Stockholders' equity 1,612,569
1,505,293 Total liabilities and stockholders' equity $
2,635,116 $ 2,467,115
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