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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 21, 2004
Coach, Inc.
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(Exact name of registrant as specified in its charter)
Maryland 1-16153 52-2242751
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(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
516 West 34th Street, New York, NY 10001
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(Address of principal executive offices) (Zip Code)
(212) 594-1850
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(Registrant's telephone number, including area code)
Item 7: Exhibits.
(c) The following exhibit is being furnished herewith:
99.1 Text of Press Release, dated January 21, 2004
Item 9: Regulation FD Disclosure; Item 12: Results of Operations and Financial
Condition.
On January 21, 2004, Coach, Inc. (the "Company") issued a press release
(the "Press Release") in which the Company announced its financial results for
its fiscal quarter ended December 27, 2003. All information in the press release
is being furnished to the Securities and Exchange Commission and shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934.
This Form 8-K and the Press Release attached hereto as Exhibit 99.1 are
being furnished to the Securities and Exchange Commission under Item 9 of Form
8-K in satisfaction of the public disclosure requirements of Regulation FD. This
Form 8-K and the Press Release, insofar as they disclose historical information
regarding the Company's results of operations or financial condition for the
fiscal quarter ended December 27, 2003, are also being furnished to the
Securities and Exchange Commission under Item 12 of Form 8-K.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 21, 2004
COACH, INC.
By: /s/ Carole P. Sadler
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Carole P. Sadler
Senior Vice President, General Counsel
and Secretary
EXHIBIT INDEX
99.1 Text of Press Release, dated January 21, 2004
Exhibit 99.1
Coach Reports Second Quarter Earnings Per Share of $0.50; up 46% and
Ahead of Expectations; Raises Guidance for FY04
NEW YORK--(BUSINESS WIRE)--Jan. 21, 2004--
Increases 2H04 Guidance to $0.48; above Consensus by $0.04 and up
45% from Prior Year
Coach, Inc. (NYSE: COH), a leading marketer of modern classic
American accessories, today announced a 46% increase in earnings per
diluted share to $0.50 for its second fiscal quarter ended December
27, 2003. This substantial increase in earnings from the prior year's
second quarter reflected a 33% gain in net sales combined with
operating margin improvement.
In the second quarter, net sales were $411.5 million, 33% higher
than the $308.5 million reported in the same period of the prior year.
Net income rose 53% to $95.4 million, or $0.50 per share, compared
with $62.4 million, or $0.34 per share the prior year. These results
were ahead of the analysts' recently revised consensus estimate of
$0.49 per share.
Lew Frankfort, Chairman and Chief Executive Officer of Coach,
Inc., said, "Our strong second quarter sales continued to reflect
Coach's expanding market share driven by the growing international
appeal of the Coach brand. This strength was evidenced throughout all
channels of our business and across all geographies as consumers
enthusiastically embraced our holiday assortment. Also, our
profitability improvement highlights our ability to further achieve
gross margin expansion and to leverage our expenses as our sales base
increases."
During the quarter, gross profit rose 41% to $305.1 million from
$216.8 million a year ago. Gross margin expanded by 390 basis points
from 70.3% to 74.2%, primarily due to shifts in channel and product
mix. SG&A expenses as a percentage of net sales declined to 35.1%, a
190 basis point decrease from the 37.0% reported in the year-ago
quarter, primarily due to leveraging the higher sales.
For the six months ended December 27, 2003, net sales were $669.9
million, up 34% from the $501.3 million reported in the first six
months of fiscal 2003. Net income rose to $137.8 million, up 62% from
the $84.9 million reported a year ago.
Second 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, increased 24% to $237.1 million from $191.5
million last year. Comparable store sales for the quarter rose
13.7%, with retail stores up 16.4% and factory store sales up
9.4%.
-- Indirect sales rose 49% to $174.4 million from $117.1 million
in the same period last year. All indirect businesses,
including Coach Japan, business-to-business, international
wholesale and US department stores, contributed to this
significant increase.
Mr. Frankfort added, "Our direct-to-consumer channel was again
strong this holiday quarter. More generally, we believe it's worth
mentioning that U.S. Coach stores, our lead business, rose 53% in
sales during the last two calendar years. This growth was fueled by a
76% increase at U.S. retail stores and a 28% gain at factory stores.
Driving these increases in turn were a 44% two-year comp at retail
stores and a 13% comp at factory, as well as 33 net new full-price
stores with 14 expansions, and 5 net new factory stores with 5
expansions.
"In our indirect segment, we saw sustained momentum in Japan, as
sales at Coach Japan grew 69%, or just over 50% in yen terms, in the
second quarter. Comparable locations posted double-digit sales gains,
as they have for 11 of the last 12 quarters, and our results in new
shops exceeded our original projections. In U.S. department stores POS
sales rose nearly 25% from prior year levels in the quarter.
"Across all businesses, handbags and women's accessories continued
to drive our business results. The expanded Soho collection, launched
in the fall, quickly became a favorite with consumers. Within Soho,
the Duffle was the key item for holiday and was offered in a wide
variety of materials and colors. Two new initiatives for Coach - our
capsule kids' collection and a new evening/occasion group - were well
received and represent growth opportunities."
During the second quarter of fiscal 2004, the company opened three
Coach retail stores, bringing the total to 165 retail stores and 77
factory stores at December 27, 2003. In addition, two stores were
relocated and/or expanded. Through Coach Japan, 3 locations were added
in Japan, bringing the total to 99.
"Our holiday momentum has continued well into January with strong
response to new styles and colors in the Soho collection, and in
updated spring accessories," Mr. Frankfort added. "Arriving next week
will be a fresh interpretation of the Hamptons carryall in pastel
suedes trimmed with patent leather, and the popular patent gallery
totes in great spring colors. For March, we're bringing back an
expanded Hamptons Weekend and Soho Twill offering to broaden Coach's
appeal in the casual, weekend market.
"This spring, as planned, we will add about 10 more retail stores
in the U.S., bringing the total to about 20 new retail stores in
fiscal 2004. We will also be adding at least two new locations in
Japan during the second half, for a full year total of at least seven
new locations. New store openings in Japan this spring include a 5,300
square foot flagship store in the Marunouchi area of Tokyo, further
leveraging our opportunity in this important market.
"Most broadly, the wind has clearly been at our backs, as we have
realized truly exceptional growth, virtually doubling our sales over
the last three calendar years. Our brand is vibrant 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. We're confident that our proven growth
strategies will enable us to further build market share in the years
ahead," Mr. Frankfort concluded.
The company now estimates full fiscal year 2004 sales of over
$1.26 billion, an increase of at least 32% from prior year, with
earnings per share of at least $1.20, compared with analysts' current
consensus estimate of $1.15 and an operating margin of more than 30%.
This reflects second half sales of at least $595 million, up 32% and
earnings per share of at least $0.48, up 45% from the $0.33 reported
for the same period in fiscal 2003 and above the analysts' consensus
estimate of $0.44.
As previously announced, during the quarter the company
repurchased and retired 1,511,300 shares of common stock at an average
cost of $36.36. At the end of the quarter approximately $65 million
remained available for future repurchases under Coach's authorized
repurchase program, which expires in January 2006.
Coach will host a conference call to review these results at 8:30
a.m. (EST) today, January 21, 2004. Interested parties may listen to
the webcast by accessing 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, 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 1-888-282-0028. 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 catalog 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.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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For the Quarters and Six Months Ended December 27, 2003 and
December 28, 2002
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(in thousands, except per share data)
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(unaudited)
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QUARTER ENDED SIX MONTHS ENDED
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December December December December
27, 28, 27, 28,
2003 2002 2003 2002
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Net sales $411,513 $308,523 $669,888 $501,314
Cost of sales 106,370 91,681 176,836 153,248
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Gross profit 305,143 216,842 493,052 348,066
Selling, general and
administrative expenses 144,439 114,242 260,723 207,858
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Operating income 160,704 102,600 232,329 140,208
Interest (income), net (466) (110) (871) (275)
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Income before income taxes
and minority interest 161,170 102,710 233,200 140,483
Income taxes 60,445 38,003 87,453 51,980
Minority interest, net of tax 5,287 2,276 7,980 3,592
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Net income $ 95,438 $ 62,431 $137,767 $ 84,911
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Basic net income per share $ 0.52 $ 0.35 $ 0.75 $ 0.48
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Shares used in computing
basic net income per share 185,231 177,956 184,418 177,990
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Diluted net income per share $ 0.50 $ 0.34 $ 0.72 $ 0.46
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Shares used in computing
diluted net income per share 191,985 183,861 191,480 184,205
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COACH, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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At December 27, 2003, June 28, 2003 and December 28, 2002
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(in thousands)
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December June December
27, 28, 28,
2003 2003 2002
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(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $372,775 $229,176 $171,141
Receivables 94,452 35,470 67,284
Inventories 157,226 143,807 135,908
Other current assets 51,548 40,085 25,855
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Total current assets 676,001 448,538 400,188
Property and equipment, net 132,353 118,547 104,404
Other assets 52,928 50,567 62,698
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Total assets $861,282 $617,652 $567,290
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 55,176 $ 26,637 $ 34,205
Accrued liabilities 143,061 108,273 128,740
Subsidiary credit facilities 34,432 26,471 42,504
Current portion of long-term debt 115 80 80
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Total current liabilities 232,784 161,461 205,529
Long-term debt 3,420 3,535 3,535
Other liabilities 5,274 3,572 4,036
Minority interest 30,135 22,155 18,139
Stockholders' equity 589,669 426,929 336,051
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Total liabilities and stockholders'
equity $861,282 $617,652 $567,290
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CONTACT: Coach
Analysts & Media:
Investor Relations:
Andrea Shaw Resnick, 212/629-2618