Press Release
Press Release
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This substantial increase in earnings from the prior year's first quarter reflected a 28% gain in net sales combined with operating margin improvement.
In the first quarter, net sales were $192.8 million, 28% higher than the $150.7 million reported in the same period of the prior year. Net income rose 79% to $22.5 million, or $0.24 per diluted share, compared with $12.5 million, or $0.14 per diluted share in the prior year. These results were ahead of the analysts' recently revised consensus estimate of $0.21 per share.
Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc., said, "Our first quarter results were driven by both the vibrancy of the Coach brand and the strong consumer response to our product offerings across all major business units. We're confident that the power of our brand, coupled with the growth strategies we have put in place, will allow Coach to continue to deliver superior financial results during these challenging retail times."
During the quarter, gross profit rose 36% to $131.2 million from $96.6 million a year ago. Gross margin expanded by 400 basis points from 64.1% to 68.1% driven by the complete ownership of our distribution in Japan through our joint venture, Coach Japan, Inc. (CJI), sourcing cost initiatives and product and channel mix. SG&A expenses as a percentage of net sales declined 260 basis points to 48.6%, compared to the 51.2% reported in the year-ago quarter.
First fiscal quarter sales results in each of Coach's primary channels of distribution grew as follows:
- Direct to consumer sales, which consist primarily of sales at U.S. Coach stores, rose 24% to $106.6 million from $86.2 million in the comparable period of the prior year. Comparable store sales for the quarter rose 13.2%, with retail stores up 20.9% and factory stores up 7.5%.
- Indirect sales increased 34% to $86.2 million from $64.5 million in the same period last year. Results were driven by strong gains in both the US wholesale and international divisions. Sales growth in the international division was due to the complete ownership of our distribution in Japan through CJI, double-digit sales gains in comparable locations and new location openings in Japan.
During the first quarter of fiscal 2003, the company opened seven and closed one Coach retail store and opened two factory stores, bringing the total to 144 retail stores and 76 factory stores at September 28, 2002. In addition, one retail store and one factory location were expanded.
Mr. Frankfort continued, "Our first quarter results were fueled by remarkably successful transitional and fall introductions. In September, we launched our fall campaign featuring the Ergo handbag collection which was very well received. For the holiday quarter, we just brought out the Slim Duffle handbag group, which is already generating very strong results ahead of our expectations. In addition to handbags and accessories, which continue to drive our results, we have also received an excellent response to our women's footwear expansion, both in U.S. department stores and in our retail stores. All of these factors, in combination with momentum which has continued into October throughout our major businesses, reinforce our confidence that we will have a strong holiday season."
"In the second quarter, as planned, we will add at least six more retail stores in the U.S., bringing the total to 13 new retail stores before holiday. We will also be adding at least 10 new locations in Japan over the fiscal year which may include the opening of a second flagship store."
The company now estimates second fiscal quarter sales of about $290 million, representing a year-over-year increase of more than 20%, and earnings per diluted share of about $0.61. For the fiscal year 2003 the company expects to generate sales of at least $865 million, an increase of at least 20% from prior year, and earnings per diluted share of at least $1.27.
Previously, the company reported that it had repurchased and retired 1,929,000 shares of common stock at an average cost of $25.89, during the first fiscal quarter. At the end of the period approximately $20 million remained available for future repurchases under the program which expires in September 2004.
Coach will host a conference call to review these results at 8:30 a.m. (ET) today, October 22, 2002. Interested parties may listen to the webcast by accessing www.coach.com/investors on the Internet or dialing into 888/455-0032 and asking for the Coach earnings call led by Andrea Shaw Resnick, VP 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 800/677-1310. 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, jewelry, sunwear, furniture and related accessories. Coach is sold worldwide through Coach stores, select department stores and specialty stores, through the Coach catalogue in the U.S. by calling 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.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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For the Thirteen Weeks Ended September 28, 2002 and September 29,
2001
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(in thousands, except per share data)
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(unaudited)
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THIRTEEN WEEKS
ENDED
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September September
28, 29,
2002 2001
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Net sales $192,791 $150,702
Cost of sales 61,567 54,131
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Gross profit 131,224 96,571
Selling, general and administrative expense 93,616 77,101
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Operating income 37,608 19,470
Interest (income)/expense, net (165) 447
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Income before income taxes and minority interest 37,773 19,023
Income taxes 13,977 6,753
Minority interest, net of tax 1,316 (268)
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Net income $ 22,480 $ 12,538
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Basic net income per share $ 0.25 $ 0.14
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Shares used in computing
basic net income per share 88,729 87,314
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Diluted net income per share $ 0.24 $ 0.14
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Shares used in computing
diluted net income per share 91,992 90,200
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COACH, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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At September 28, 2002, June 29, 2002 and September 29, 2001
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(in thousands)
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September June 29, September
28, 29,
2002 2002 2001
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(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $ 44,033 $ 93,962 $ 4,733
Receivables 45,009 30,925 33,693
Inventories 152,724 136,404 132,469
Other current assets 26,154 26,297 25,093
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Total current assets 267,920 287,588 195,988
Property and equipment, net 97,099 90,589 76,598
Other assets 61,330 62,394 47,838
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Total assets $ 426,349 $440,571 $ 320,424
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LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable $ 32,547 $ 25,819 $ 16,888
Accrued liabilities 96,751 99,365 85,411
U.S. revolving credit facility - - 40,500
Subsidiary credit facilities 35,042 34,169 -
Current portion of long-term debt 80 75 75
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Total current liabilities 164,420 159,428 142,874
Long-term debt 3,535 3,615 3,615
Other liabilities 3,640 2,625 2,988
Minority interest 15,863 14,547 14,095
Stockholders' equity 238,891 260,356 156,852
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Total liabilities and
stockholders' equity $ 426,349 $440,571 $ 320,424
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CONTACT:
Coach
Analysts & Media
Andrea Shaw Resnick, VP Investor Relations, 212/629-2618
or
Burson-Marsteller
Media
Jennifer Lipari, cell 646/824-9508 or 212/614-4619