Press Release
Press Release
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This substantial increase in earnings from the prior year's third quarter reflected a 29% gain in net sales combined with operating margin improvement.
In the third quarter, net sales were $161.6 million, 29% higher than the $125.7 million reported in the same period of the prior year. Net income rose 89% to $14.7 million, or $0.32 per fully diluted share, compared with $7.8 million, or $0.17 per share the prior year. These results were ahead of analysts' recently revised consensus estimate of $0.28 per share. (Net income for both periods excludes restructuring charges for the closure of manufacturing facilities in Lares, Puerto Rico in March, 2002 and Medley, Florida in October, 2000. Including these charges and related adjustments, net income was $11.8 million or $0.26 per fully diluted share compared to $8.0 million or $0.18 per share recorded in the year-ago quarter.)
Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc. said, "I am truly delighted with our third quarter performance, building upon the strength of the holiday season. We clearly have momentum, with the consumer enthusiastically embracing Coach as a modern, classic accessory and gift resource. Our product appeals to today's discerning consumer across virtually all of our offerings. Results during this challenging 2002 fiscal year further demonstrate that Coach has a proven formula for sustainable growth and superior returns."
During the quarter, gross profit rose 38% to $111.1 million from $80.4 million a year ago. Gross margin expanded by 480 basis points from 64.0% to 68.8% driven by the consolidation of Coach Japan, Inc. (CJI) and sourcing cost initiatives. SG&A expenses as a percentage of net sales were virtually flat at 54.1%, compared to the 54.2% reported in the year-ago quarter.
For the first nine months of fiscal year 2002 ended March 30, 2002, net sales were $548.0 million, up 17% from the $468.2 million reported in the first nine months of fiscal 2001. Net income rose to $71.4 million, up over 23% from the $57.8 million reported a year ago before the impact of reorganization charges taken in both periods. Including the impact of these charges, net income rose 25% from prior-year levels to $68.5 million from $54.8 million.
Third 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 22% to $93.9 million from $77.0
million in the comparable period of the prior year. Comparable
store sales for the quarter rose 9.6% with retail stores up
9.9% and factory store sales up 9.2%.
- Indirect sales increased 39% to $67.7 million from $48.7 million in the same period last year. Results were driven by strong gains in both the US wholesale and international divisions, the latter as a result of both the consolidation of the joint venture in Japan, and mid-single-digit gains in comparable location sales in Japan.
During the third quarter of fiscal 2002, the company opened one Coach retail store and converted one retail store to a factory store, bringing the total to 132 retail stores and 73 factory stores at March 30, 2002. In addition, 4 retail stores were renovated. At quarter-end, through new store openings and renovations, 107 Coach retail stores, representing about 85% of retail sales volume, reflected the new retail format.
"While the third quarter results were driven by remarkably successful spring introductions and enhanced by unusually mild weather in the U.S., we're confident that our momentum will continue through the seasons ahead. In March, we launched our spring campaign featuring the Hamptons market tote. Later this season, we're introducing a straw group and transitional groups of leather/twill Classic Stripe and Signature Stripe handbags," Mr. Frankfort added. "In addition to handbags and accessories, which continue to drive our results, we have received a very strong response to our women's footwear, both in U.S. department stores and in our retail stores."
"In the fourth quarter, as planned, we will add at least six more retail stores in the U.S., bringing the total to 20 new retail stores in fiscal 2002. We will also be adding 4 new locations in Japan over the balance of the fiscal year, bringing the total to 11 new stores this year. This includes the opening of our first flagship store which is located in the Ginza, further raising our brand awareness in this underpenetrated market."
The company now estimates fourth fiscal quarter sales equal to third quarter of fiscal 2002 levels of about $162 million, representing a year-over-year increase of more than 20%, and earnings per fully diluted share of at least $0.32. For the fiscal year 2002 the company expects to generate sales of about $710 million, an increase of over 18% from prior year, and earnings per share of at least $1.90. For fiscal 2003 we expect sales growth of 10-15%, operating income increasing by at least 25% and earnings per share of at least $2.20.
Coach will host a conference call to review these results at 8:30 a.m. (EDT) today, April 23, 2002. Interested parties may listen to the webcast by accessing www.coach.com/investors on the Internet or dialing into 1-877-915-2769 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 today, for a period of five business days. The number to call is 1-888-568-0890. 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, luggage and travel accessories, footwear, watches, outerwear, jewelry, 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 Thirty-Nine Weeks Ended March 30,2002 and
March 31, 2001
(in thousands, except per share data)
(unaudited)
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------- ------------------------
March 30, March 31, March 30, March 31,
2002 2001 2002 2001
------------ ----------- ------------ -----------
Net sales $ 161,571 $ 125,716 $ 548,023 $ 468,239
Cost of sales 50,465 45,272 178,728 168,982
---------- ---------- ---------- ----------
Gross profit 111,106 80,444 369,295 299,257
Selling, general
and administrative
expenses 87,378 68,081 256,156 208,440
Reorganization costs 4,467 (363) 4,467 4,587
---------- ---------- ---------- ----------
Operating income 19,261 12,726 108,672 86,230
Interest expense, net (129) 430 539 1,942
---------- ---------- ---------- ----------
Income before income
taxes and minority
interest 19,390 12,296 108,133 84,288
Provision for income
taxes 6,883 4,303 38,388 29,500
Minority Interest,
net of tax 689 - 1,223 -
---------- ---------- ---------- ----------
Net income $ 11,818 $ 7,993 $ 68,522 $ 54,788
========== ========== ========== ==========
Basic net income
per share $ 0.27 $ 0.18 $ 1.56 $ 1.35
========== ========== ========== ==========
Shares used in
computing basic
net income per
share 44,212 43,513 43,853 40,684 (1)
========== ========== ========== ==========
Diluted net income
per share $ 0.26 $ 0.18 $ 1.52 $ 1.32
========== ========== ========== ==========
Shares used in
computing diluted
net income
per share 45,823 45,385 45,210 41,641 (1)
========== ========== ========== ==========
(1) - Represents weighted average of outstanding shares before and
after the public offering.
Supplemental information
------------------------
Net income, as reported $ 11,818 $ 7,993 $ 68,522 $ 54,788
Add back reorganization
costs (net of tax) 2,881 (236) 2,881 2,982
Net income, excluding
reorganization costs $ 14,699 $ 7,757 $ 71,403 $ 57,770
Supplemental diluted
net income, excluding
reorganization cost,
per share $ 0.32 $ 0.17 $ 1.58 $ 1.30
Shares used in computing
supplemental diluted
net income, excluding
reorganization costs,
per share 45,823 45,385 45,210 44,470 (2)
(2) - Number of shares outstanding after the public offering are
assumed to be outstanding for all periods presented.
COACH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
At March 30, 2002, June 30, 2001 and March 31, 2001
(in thousands)
March 30, June 30, March 31,
2002 2001 2001
------------ ------------ ------------
(unaudited) (unaudited)
ASSETS
Cash $ 76,278 $ 3,691 $ 7,241
Receivables 25,563 20,608 20,642
Inventories 131,783 105,162 104,183
Other current assets 27,244 22,106 20,701
----------- ----------- -----------
Total current assets 260,868 151,567 152,767
Property, net 84,295 72,388 70,609
Trademarks and other assets 53,457 34,756 28,333
----------- ----------- -----------
Total assets $ 398,620 $ 258,711 $ 251,709
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 26,162 $ 14,313 $ 12,338
Accrued liabilities 86,184 82,390 78,330
U.S. revolving credit facility - 7,700 19,000
Subsidiary credit facilities 35,386 - -
Long-term debt due within 1 year 75 45 45
----------- ----------- -----------
Total current liabilities 147,807 104,448 109,713
Long-term debt 3,615 3,690 3,690
Other liabilities 2,262 2,259 2,303
Minority interest 15,586 - -
Common stockholders' equity 229,350 148,314 136,003
----------- ----------- -----------
Total liabilities and stockholders'
equity $ 398,620 $ 258,711 $ 251,709
============ =========== ===========
CONTACT:
Coach
Investor Relations:
Analysts & Media
Andrea Shaw Resnick, 212/629-2618
or
Burson-Marsteller
Media:
Jennifer Lipari, cell 646/824-9508 or 212/614-4619