Press Release
Press Release
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NEW YORK--(BUSINESS WIRE)--Jan. 22, 2003--Coach, Inc. (NYSE: COH) Coach, Inc. (NYSE: COH), a leading marketer of modern classic American accessories, today announced a 39% increase in earnings per diluted share to $0.68 for its second fiscal quarter ended December 28, 2002.
This substantial increase in earnings from the prior year's second quarter reflected a 31% gain in net sales combined with operating margin improvement.
In the second quarter, net sales were $308.5 million, 31% higher than the $235.8 million reported in the same period of the prior year. Net income rose 41% to $62.4 million, or $0.68 per share, compared with $44.2 million, or $0.49 per share the prior year. These results were ahead of the analysts' recently revised consensus estimate of $0.66 per share.
Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc., said, "Our strong second quarter sales demonstrated sustained momentum in all areas of our business across all geographies. These results reflect the vibrancy of the Coach brand as we continue to grow market share in the US and Japan. Further, our earnings evidenced our stable retail pricing policy, improved manufacturing margins and our ability to leverage our expenses despite the promotional retail environment."
During the quarter, gross profit rose 34% to $216.8 million from $161.6 million a year ago. Gross margin expanded by 170 basis points from 68.6% to 70.3%, driven by sourcing cost initiatives, product mix, and channel mix. SG&A expenses as a percentage of net sales declined to 37.0%, a 190 basis point decrease from the 38.9% reported in the year-ago quarter, primarily due to leveraging the higher sales.
For the six months ended December 28, 2002, net sales were $501.3 million, up 30% from the $386.5 million reported in the first six months of fiscal 2002. Net income rose to $84.9 million, up 50% from the $56.7 million reported a year ago.
Second fiscal quarter sales results in each of Coach's primary channels of distribution grew as follows:
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Direct to consumer sales, which consist primarily of sales at U.S. Coach stores, increased 19% to $191.5 million from $160.5 million last year. Comparable store sales for the quarter rose
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12.7%, with retail stores up 18.1% and factory store sales up 5.8%.
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Indirect sales rose 56% to $117.1 million from $75.3 million in the same period last year. All indirect businesses including Coach Japan, US department stores, international wholesale and special markets, contributed to this significant increase.
Mr. Frankfort added, "Our full-priced business was especially strong this holiday. In US retail, our seasonal theme of Perfect Presents, which focused on 12 key item groups across a wide range of prices, resonated particularly well with the consumer. In our indirect segment, we saw momentum continuing in US department stores. During the fall season to date - our fiscal first half - Coach's handbag and accessory market share in department stores increased significantly, with POS sales rising 30% from prior year levels."
"We were also pleased with our performance in Japan, as comparable locations posted double-digit sales gains, and our results in new shops, including the Ginza flagship, exceeded our original projections."
During the second quarter of fiscal 2003, the company opened six Coach retail stores, bringing the total to 150 retail stores and 76 factory stores at December 28, 2002. In addition, one store was relocated and expanded. Through Coach Japan, four net locations were added in Japan, bringing the total to 89.
"Our holiday momentum has continued into January with strong response to new styles and colors in the Hamptons Leather and Signature groups, and in updated spring accessories," Mr. Frankfort added. "Arriving next week will be a fresh interpretation of Signature handbags and accessories, featuring a subtle mini logo pattern. We will also be expanding footwear to 20 additional retail stores shortly, bringing total locations carrying footwear to about 80. For March, we're introducing two new groups - Soho twill and Hamptons Weekend - which are expected to increase Coach's appeal in the casual, weekend market."
"This spring, as planned, we will add seven more retail stores in the U.S., bringing the total to 20 new retail stores in fiscal 2003. We will also be adding at least six new locations in Japan during the second half, including our second flagship store in the Shibuya area of Tokyo, further leveraging our opportunity in this under-penetrated market."
"Most broadly, we're confident that the accelerated market share growth that Coach has been enjoying is sustainable. Our brand is vital and our franchise continues to expand by obtaining a larger share of our existing user's accessory wardrobe while attracting a newer consumer who demonstrates strong repurchase behavior. Our key growth strategies will enable us to build upon our position as a leading American accessible luxury brand in calendar 2003 and in the years ahead," Mr. Frankfort concluded.
The company now estimates full fiscal year 2003 sales of at least $900 million, an increase of 25% from prior year, and earnings per share of at least $1.40, compared with analysts' current consensus estimate of $1.33. This reflects earnings per share of at least $0.48 for the second half of the fiscal year, up over 40% from the $0.34 reported for the same period in fiscal 2002 and above the analysts' consensus estimate of $0.42.
Coach will host a conference call to review these results at 8:30 a.m. (EST) today, January 22, 2003. Interested parties may listen to the webcast by accessing www.coach.com/investors on the Internet or dialing into 1-888-455-0032 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 that day, for a period of five business days. The number to call is 1-800-294-6360. 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, 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 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 Thirteen and Twenty-Six Weeks Ended December 28, 2002
and December 29, 2001
(in thousands, except per share data)
(unaudited)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
--------------------- ----------------------
December December December December
28, 29, 28, 29,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net sales $ 308,523 $ 235,750 $ 501,314 $ 386,452
Cost of sales 91,681 74,132 153,248 128,263
---------- ---------- ---------- ----------
Gross profit 216,842 161,618 348,066 258,189
Selling, general and
administrative expenses 114,242 91,677 207,858 168,778
---------- ---------- ---------- ----------
Operating income 102,600 69,941 140,208 89,411
Interest
(income)/expense, net (110) 221 (275) 668
---------- ---------- ---------- ----------
Income before income
taxes and minority
interest 102,710 69,720 140,483 88,743
Provision for income
taxes 38,003 24,752 51,980 31,505
Minority interest, net of
tax 2,276 802 3,592 534
---------- ---------- ---------- ----------
Net income $ 62,431 $ 44,166 $ 84,911 $ 56,704
========== ========== ========== ==========
Basic net income per
share $ 0.70 $ 0.51 $ 0.95 $ 0.65
========== ========== ========== ==========
Shares used in computing
basic net income per
share 88,978 87,380 88,995 87,404
========== ========== ========== ==========
Diluted net income per
share $ 0.68 $ 0.49 $ 0.92 $ 0.63
========== ========== ========== ==========
Shares used in computing
diluted net income per
share 91,931 89,413 92,103 89,864
========== ========== ========== ==========
Note - The effect of the July 3,2002 two-for-one stock split has
been retroactively applied to all periods presented.
COACH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
At December 28, 2002, June 29, 2002 and December 29, 2001
(in thousands)
December June December
28, 29, 29,
2002 2002 2001
---------- ---------- ----------
(unaudited) (unaudited)
ASSETS
Cash $ 171,141 $ 93,962 $ 66,523
Receivables 67,284 30,925 29,139
Inventories 135,908 136,404 115,424
Other current assets 25,855 26,297 31,362
---------- ---------- ----------
Total current assets 400,188 287,588 242,448
Property, net 104,404 90,589 81,776
Trademarks and other assets 62,698 62,394 44,562
---------- ---------- ----------
Total assets $ 567,290 $ 440,571 $ 368,786
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 34,205 $ 25,819 $ 21,980
Accrued liabilities 128,740 99,365 97,657
U.S. revolving credit facility - - -
Subsidiary credit facilities 42,504 34,169 15,917
Long-term debt due within 1 year 80 75 75
---------- ---------- ----------
Total current liabilities 205,529 159,428 135,629
Long-term debt 3,535 3,615 3,615
Other liabilities 4,036 2,625 3,019
Minority interest 18,139 14,547 14,897
Common stockholders' equity 336,051 260,356 211,626
---------- ---------- ----------
Total liabilities and stockholders'
equity $ 567,290 $ 440,571 $ 368,786
========== ========== ==========
CONTACT:
Coach, Inc., New York
Analysts & Media:
Investor Relations
Andrea Shaw Resnick
212-629-2618
Media:
Burson-Marsteller, New York
Jennifer Stalzer
cell 646-824-9508 or 212-614-4619