NEW YORK--(BUSINESS WIRE)--Oct. 23, 2001--Coach, Inc. (NYSE: COH), a leading marketer of modern classic American accessories, today announced a 16% increase in net income for its first fiscal quarter ended September 29, 2001.

This increase in net income from the prior year's first quarter reflected 15% growth in net sales combined with operating margin improvement.

Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc., said, "I'm very pleased with our first quarter results, especially considering the impact of the terrible events of September 11th and the weak economic environment. Our ability to execute our key strategies and attain our financial goals during this time demonstrates the strength of our U.S. and international multi-channel businesses and the flexibility of our operating model."

"In response to today's challenging environment, we are sharply focusing our energies to drive customer traffic and manage corporate spending. At the same time, we will continue to invest in our growth, keeping our new store opening schedule as planned. We're confident that the strategies we have put in place, coupled with new initiatives, will allow Coach to continue to deliver superior financial results during these volatile times," Mr. Frankfort concluded.

For the first quarter, net sales rose 15% to $150.7 million from last year's first quarter. Net income increased 16% to $12.5 million, or $0.28 per fully diluted share, from $10.8 million or $0.25 per share in the year ago period before the impact of a reorganization charge related to the closing of a manufacturing facility taken in the year-ago quarter. Including these costs in the year ago period, net income rose 65%. Earnings per share for the first quarter were in line with company guidance of $0.27-$0.28 and the consensus estimate of $0.28.

Gross margin in the quarter increased by 180 basis points on a year-over-year basis from 62.3% to 64.1%, consistent with plan. This improvement was primarily driven by a shift in product mix reflecting the continued diversification into new and successful fabric and leather collections. In addition, gross margin benefited from Coach Japan's acquisition of the company's primary distributor in Japan on July 31, 2001 and by the continuing impact of sourcing cost reductions.

Consistent with plan, SG&A expenses as a percentage of net sales rose in the first quarter to 51.2% from the 49.6% generated in the year-ago quarter due to impact of the joint venture in Japan. This was partially offset by operating leverage achieved in the basic business as the sales base expanded. As a result, the operating margin in the quarter reached 12.9% compared with 12.7% in the year-ago first quarter.

First fiscal quarter sales grew in each of Coach's primary channels of distribution as follows:

• Direct to consumer sales, which consist primarily of sales at Coach stores, rose 7% to $86.2 million from $80.5 million in the comparable period of the prior year, driven by new and expanded stores. Comparable store sales, negatively impacted by the significant decline in consumer spending following the tragic events of September 11th, declined 1.9% during the first quarter, with retail stores down 3.7%, and factory stores down 0.6%. From September 11th through September 29th, comparable store sales declined approximately 15%. Subsequent to quarter end and through October 21st, comparable store sales are running down 6%, a decidedly improving trend.

• Indirect sales increased 27% to $64.5 million in the first quarter from $51.0 million in the comparable period of the prior year. Results for the period were driven by strong gains in the international division, highlighted by the seventh consecutive quarter of double-digit increases in comparable location sales to Japanese consumers worldwide. Also contributing to the sales growth was the consolidation of the joint venture in Japan.

During the first quarter of fiscal 2002, the company opened four Coach retail stores, lost the store in the World Trade Center and closed one location. In addition, the company opened three Coach factory stores, bringing the totals to 123 retail stores and 71 factory stores as of quarter end.

Under its newly authorized $80 million three-year stock repurchase program, the company repurchased and retired 330,000 shares of common stock at an average cost of $23.20, during the quarter. At the end of the quarter approximately $72 million remained available for future repurchases under the program which expires in September 2004.

In the wake of the events of September 11th, the company has modestly revised its sales and earnings per share targets for the balance of the fiscal year. The company now estimates full fiscal year 2002 sales of at least $675 million, an increase of 12% from prior year, and earnings per share of $1.60-$1.65, consistent with consensus estimates.

Second fiscal quarter sales are projected to rise to at least $225 million, an increase of 7%, with earnings per share forecasted to reach at least $0.92 versus $0.88 in the year-ago quarter.

Coach, with headquarters in New York, is a leading American marketer of fine accessories and gifts for women and men, including handbags, business cases, furniture, luggage and travel accessories, wallets, footwear, watches, outerwear 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 800-262-2411 and through Coach's website at www.Coach.com.

Coach's shares are traded on The New York Stock Exchange under the symbol COH.

Coach will host a conference call to review these results at 8:30 a.m. (EDT) today, October 23, 2001. Interested parties may listen to the webcast by accessing www.coach.com/investors or www.vcall.com on the Internet or dialing into 1-877-601-3550 and asking for the Coach earnings call led by Andrea Shaw Resnick, DVP of Investor Relations. A telephone replay will be available starting at 12:00 noon on October 23, for a period of five business days. The number to call is 1-800-677-4908. A webcast replay of this call will be available for five business days on the Coach website.

Information on Coach products can be found on the Web at: http://www.coach.com. This press release contains forward-looking statements, based on current expectations, that involve risks and uncertainties that could cause results of Coach, Inc. to differ materially from management's current expectations. These forward-looking 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 the negative thereof or comparable terminology, including predictions of future results. Future results will vary from historical results, and historical growth is not indicative of future trends. Our future results will depend upon expected economic trends, our ability to anticipate consumer preferences for accessories and fashion trends, our ability to control costs, our store expansion and renovation program, currency fluctuations, and other factors. Please refer to the company's Annual Report on Form 10-K for a complete list of risk factors.

                              COACH, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Thirteen Weeks Ended September 29, 2001 and September 30, 2000
                 (in thousands, except per share data)
                              (unaudited)

                                       THIRTEEN WEEKS ENDED
                              ---------------------------------------
                                  September 29,         September 30,
                                    2001                  2000
                              -----------------      ----------------

 Net sales                           $ 150,702             $ 131,497

 Cost of sales                          54,131                49,564
                              -----------------      ----------------

 Gross profit                           96,571                81,933
 Selling, general and 
  administrative expense                77,101                65,191
 Reorganization costs                        -                 4,950
                              -----------------      ----------------

 Operating income                       19,470                11,792
 Interest expense, net                     447                   113
                              -----------------      ----------------

 Income before income taxes             19,023                11,679
 Income taxes                            6,753                 4,088
 Minority Interest                        (268)                    -
                              -----------------      ----------------

 Net income                           $ 12,538               $ 7,591
                              =================      ================


 Pro forma basic net income 
  per share                             $ 0.29                $ 0.17
                              =================      ================

 Shares used in computing pro 
  forma basic net income per 
  share                                 43,657              43,513 (1)
                              =================      ================

 Pro forma diluted net income 
  per share                             $ 0.28                $ 0.17
                              =================      ================

 Shares used in computing pro 
  forma diluted net income per
  share                                 45,100              43,670 (1)
                              =================      ================

(1) Common shares issued in the October 2000 public offering are
    assumed to be outstanding for all periods presented.
----------------------------------------------------------------------

 Supplemental information     

 Net income, as reported              $ 12,538               $ 7,591

 Add back Reorganization 
  costs (net of tax)                         -                 3,218
                              -----------------      ----------------

 Net income, as adjusted              $ 12,538              $ 10,809
                              =================      ================

 Pro forma diluted net income,
   as adjusted, per share               $ 0.28                $ 0.25
                              =================      ================

 Shares used in computing pro 
  forma as adjusted diluted 
  net income, as restated per 
  share                                 45,100              43,670 (1)
                              =================      ================


                              COACH, INC.
                 CONDENSED CONSOLIDATED BALANCE SHEETS
      At September 29, 2001, June 30, 2001 and September 30, 2000
                            (in thousands)

                                                          Pro forma
                      September 29,      June 30,      September 30,
                           2001            2001               2000
                      ------------------------------------------------
                       (unaudited)                     

 ASSETS

 Cash                          $ 4,733       $ 3,691           $ 164
 Receivables                    33,693        20,608          24,855
 Inventories                   132,469       105,162         119,397
 Other current assets           25,093        22,106          17,047
                      ------------------------------------------------

 Total current assets          195,988       151,567         161,463

 Property, net                  76,598        72,388          66,314
 Trademarks and 
  other assets                  47,838        34,756          33,718
                      ------------------------------------------------

 Total assets                $ 320,424     $ 258,711       $ 261,495
                      ================================================

 LIABILITIES AND 
  STOCKHOLDERS' EQUITY

 Accounts payable             $ 16,888      $ 14,313        $ 10,407
 Accrued liabilities            85,411        82,390          82,948
 Revolving credit 
  facility                      40,500         7,700           5,671
 Long-term debt due 
  within 1 year                     75            45              40
                      ------------------------------------------------

 Total current 
  liabilities                  142,874       104,448          99,066

 Long-term debt                  3,615         3,690          71,735
 Other liabilities               2,988         2,259           2,158

 Minority Interest              14,095             -               -

 Common stockholders' 
  equity                       156,852       148,314          88,536
                      ------------------------------------------------
 Total liabilities and
  stockholders' equity       $ 320,424     $ 258,711       $ 261,495
                      ================================================

    Pro forma amounts at September 30, 2000 reflect the completion of
the initial public offering of common stock, the assumption of long
term debt and the partial repayment of this debt from the proceeds of
the stock issuance. These transactions were completed in October 2000.