NEW YORK, Apr 20, 2010 (BUSINESS WIRE) --Coach, Inc. (NYSE: COH), a leading marketer of modern classic American accessories, today reported sales of $831 million for its third fiscal quarter ended March 27, 2010, compared with $740 million reported in the same period of the prior year, an increase of 12%. Earnings per diluted share totaled $0.50 for the quarter compared to $0.36 a year ago, an increase of 40%. Net income rose 37% to $158 million from $115 million reported for the prior year. It should be noted, last year's third quarter included a one-time charge related to certain cost reduction measures of $13 million before tax and $8 million after tax. Excluding this one-time charge from prior year results, net income rose 28% and earnings per share increased 31%.

The company also announced that its Board of Directors has voted to double its cash dividend, raising it to an annual rate of $0.60 per share starting with the dividend to be paid to stockholders in July 2010. Concurrently, the Board has authorized the repurchase of up to $1 billion of its outstanding common stock by June 30, 2012.

Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc. said, "Our excellent third quarter results showed further strengthening of our full-priced businesses across all geographies and channels. These trends reflect the traction of the strategies we put into place entering 2010, positioning Coach well for the future. Further, the announcements today of the doubling of our dividend and the authorization of a new buyback program reflect our financial strength and our confidence in Coach's business outlook."

"We were very pleased to achieve results which showed double-digit increases in each key financial metric - sales, operating income, net income and earnings per share. Importantly, we are also making significant strides in the globalization of the Coach brand. In China, we're continuing to experience rapid growth and our business is trending about a year ahead of our originally articulated plan. We're now targeting to achieve about $250 million in sales during FY12. In addition, we're opening our first mainland China flagship, in Shanghai, this week."

"Looking beyond North America and Asia, we're pleased to announce our expansion plans into Western Europe. Through an agreement with Printemps, the renowned French department store group, we plan to open at least 14 locations in Printemps stores throughout France over the next three years. Our first will be a 1,700 square foot shop in their flagship boulevard Haussmann store in Paris this June. In addition, we've reached an agreement in principle to establish a joint venture with Hackett Limited, the iconic British retailer, to open Coach stores in the U.K., Spain, Portugal and Ireland. We expect that the first locations in the U.K. and Spain will open during the next twelve months. We're confident that the Coach proposition of New York fashion and accessible luxury will resonate with the stylish European consumer, as it has throughout North America, Asia, and the Middle East," Mr. Frankfort added.

For the quarter, operating income totaled $249 million, up 34% from the $185 million reported in the comparable year-ago period, while operating margin was 30.0% versus 25.1% reported for the prior year. During the quarter, gross profit rose 17% to $616 million from $525 million a year ago. Gross margin was 74.1% versus 71.0% a year ago, benefitting primarily from lower manufacturing costs.

SG&A expenses as a percentage of net sales, at 44.1%, compared to 45.9% in the year-ago quarter. Excluding the impact of the one-time charge in the year-ago period, third quarter 2009 operating income totaled $199 million, the operating margin was 26.9% and the SG&A expense ratio was 44.1%.

The company also announced that during the third fiscal quarter, it repurchased and retired nearly 11.3 million shares of its common stock at an average cost of $35.52, spending a total of $400 million. At the end of the period, approximately $10 million remained under the company's previous repurchase authorization.

Third fiscal quarter sales in each of Coach's primary channels of distribution were as follows:

• Direct-to-consumer sales rose 15% to $726 million in the third quarter from $634 million last year. North American comparable store sales for the quarter rose 5.1%. In Japan, sales declined 1% on a constant-currency basis, while dollar sales rose 2%, reflecting the stronger yen year-over-year. China sales were robust, as retail sales continued to comp at a double-digit rate.
• Indirect sales decreased 1% to $105 million in the third quarter from the $106 million reported for the prior year. This decline was primarily due to slightly reduced shipments into U.S. department stores as the company continues to tightly manage inventories in that channel. However, sales at POS in both U.S. department stores and in international wholesale locations rose during the period.

During the third quarter of fiscal 2010, the company opened two retail stores and closed two others, while opening one factory store in North America, bringing the total to 343 retail stores and 119 factory stores as of March 27, 2010. In Japan, Coach opened its first men's store, a factory store and a duty-free wholesale location. Therefore, at the end of the quarter there were 166 total locations in Japan.

"Our growth demonstrates our ability to manage our business nimbly, while investing prudently for the future. We're accelerating our distribution plans to leverage the emerging market opportunity with a particular focus on China, while also exploring new geographies capitalizing on the increasing popularity and recognition of the brand with discerning consumers globally. And, with a business model that generates significant cash flow and with virtually no debt, we are in a position to take advantage of profitable growth opportunities, while continuing to return capital to shareholders," Mr. Frankfort concluded.

For the nine months ended March 27, 2010, net sales were $2.657 billion, up 8% from the $2.453 billion reported in the first nine months of fiscal 2009. Net income totaled $539 million, up 11% from the $486 million reported a year ago, excluding the one-time charge, while earnings per share rose 14% to $1.69 from $1.49 on the same basis. Including the impact of the one-time charge last year, net income for the nine months totaled $478 million and earnings per share were $1.46 in the third quarter of FY09.

Coach will host a conference call to review these results at 8:30 a.m. (EDT) today, April 20, 2010. Interested parties may listen to the webcast by accessing http://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 http://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.

SOURCE: Coach, Inc.

Coach
Analysts & Media:
Andrea Shaw Resnick, 212-629-2618
SVP Investor Relations and Corporate Communications