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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 23, 2007
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 2.02: Results of Operations and Financial Condition.
On January 23, 2007, 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 30, 2006. 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
(the "Exchange Act") or otherwise subject to liability under that section, nor
shall it be deemed incorporated by reference in any filing under the Securities
Act of 1933, as amended, or the Exchange Act, except as expressly set forth by
specific reference in such a filing.
The attached press release includes the following Non-GAAP financial
information:
o The Company's net sales have been presented both including and
excluding the effect of currency fluctuation effects from translating
foreign-denominated sales into U.S. dollars for the quarter and
compared to the same quarter in the prior fiscal year.
The Company believes that it is appropriate to present this supplemental
information, for the following reasons:
o Presenting the Company's net sales in the attached release without the
impact of currency fluctuations will allow investors to better
understand the Company's operating and financial results and how such
results compare with the Company's prior guidance. In addition, this
presentation will help investors and analysts to understand the
increase in net sales over the prior-year periods on a
constant-currency basis, a valuable measure of relative sales
performance in the Company's markets.
Item 9.01: Financial Statements and Exhibits.
(c) Exhibits. The following exhibit is being furnished herewith:
99.1 Text of Press Release, dated January 23, 2007
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 25, 2007
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 23, 2007
Exhibit 99.1
Coach Reports Second Quarter Earnings Growth of 36% on a Sales Gain of 29%;
Ahead of Analysts' Expectations
Increases FY07 Guidance to $1.71; Up 34% from Prior Year and Ahead
of Analysts' Expectations of $1.67
NEW YORK--(BUSINESS WIRE)--Jan. 23, 2007--Coach, Inc. (NYSE: COH),
a leading marketer of modern classic American accessories, today
announced an increase of 36% in earnings per diluted share to $0.61
for its second fiscal quarter ended December 30, 2006, up from $0.45
per diluted share a year ago. These results were ahead of the
analysts' consensus estimate of $0.58 per share.
In the second quarter, net sales were $836 million, 29% higher
than the $650 million reported in the same period of the prior year.
Net income rose 31% to $227 million, compared with $174 million in the
prior year.
Lew Frankfort, Chairman and Chief Executive Officer of Coach,
Inc., said, "Our extraordinary second quarter performance demonstrates
that Coach has attained a new level of popularity in North America,
reflecting the strength of our product and franchise, our position as
a gift authority and the rapid expansion of the handbag and accessory
category. In addition, our significant profitability improvement
highlights our ability to continue to leverage our expenses as our
sales base increases."
Mr. Frankfort added, "It's worth noting that U.S. full price store
sales accelerated again this quarter, as we generated the highest
level of holiday comparable store sales increases in the company's
public history. It was also the 19th consecutive quarter of
double-digit comps in retail stores. These exceptional results were
driven by all three metrics - conversion, traffic and average
transaction size. Further, in U.S. department stores, POS sales rose
over 34% from prior year levels in the quarter. Clearly, Coach's share
of the fast-growing U.S. premium handbag and women's accessory market
continues to expand across all channels. In addition, we're very
pleased with the 17% growth in sales in constant currency in Japan
this quarter, amid weakening market conditions, as we continue to grow
our market share."
Quarterly operating income totaled $362 million, up 32% from the
$274 million reported in the comparable year ago period, while
operating margin rose to 43.3%, a 120 basis point improvement from the
42.1% reported for the prior year. During the quarter, gross profit
rose 28% to $644 million from $505 million a year ago, while gross
margin remained exceptionally high at 77.1% versus 77.6%. SG&A
expenses as a percentage of net sales declined 170 basis points to
33.8%, compared to the 35.5% reported in the year-ago quarter.
For the six months ended December 30, 2006, net sales were $1.4
billion, up 26% from the $1.1 billion reported in the first six months
of fiscal 2006. Net income rose to $353 million, up 32% from the $268
million reported a year ago, while earnings per share rose 37% to
$0.94 from $0.69.
Second fiscal quarter sales results in each of Coach's primary
channels of distribution grew as follows:
-- Direct-to-consumer sales increased 34% to $675 million from
$504 million last year. U.S. comparable store sales for the
quarter rose 25.7%, with retail stores up 20.8% and factory
store sales up 33.4%. The continuing exceptional U.S. factory
store performance reflects brand saliency, channel strength
and the success of a strong merchandise offering. In Japan,
sales rose 17% on a constant currency basis, while dollar
sales rose 18% due to a slightly stronger yen. Coach achieved
mid-single-digit increases in overall comparable location
sales. Lastly, Coach again generated excellent sales gains on
the Internet, increasing 46% during the second quarter.
-- Indirect sales rose 10% to $161 million from $146 million in
the same period last year. Indirect was driven by significant
gains in U.S. wholesale shipments. As planned, international
wholesale shipments were curbed to take into account slowing
Japanese travel trends in our markets, and to ensure healthy
inventory levels.
During the second quarter of fiscal 2007, the company opened seven
North American Coach retail stores and three factory stores, bringing
the total to 237 retail stores and 90 factory stores at December 30,
2006. In Japan, Coach opened two new retail locations, closed one and
expanded one additional location as well.
Mr. Frankfort continued, "Across all businesses, handbags and
women's accessories sales continued to drive our results. Our key item
strategy was very successful, with featured groups and item concepts
generating nearly 50% of our holiday sales. Legacy, our newest
lifestyle platform, which was inspired by our classic heritage, was
the most important initiative during the quarter. It was extremely
well received by consumers, elevating our overall brand cachet."
"In addition, our core handbag groups including Gallery totes,
Holiday patchwork and Duffels performed well. New products, such as
our $98 multi-function wallet and our pet accessories were the perfect
add-on holiday gifts as was our new jewelry offering. In fact, this
capsule group, primarily consisting of enamel bracelets, was
introduced in a cross section of stores and was an instant success,
once again proving that our consumers are willing to give us trial in
complementary categories. The strength of our product offering across
a very broad range of price points is a reflection of its appeal to
our diverse consumer base."
"Coach is enjoying a very strong January, driven by the
enthusiastic response to our transitional and early spring offerings.
These introductions include the new Carly handbag group within the
Legacy collection, offered in leather, suede and Signature across
multiple silhouettes, with iconic elements such as harness detailing
and turnlocks. In addition, we updated our Hamptons collection, with a
fresh color palette and silhouettes, and introduced new spring
accessories," Mr. Frankfort added. For February, we will be
introducing an evolved interpretation of Soho, featuring Satchels, and
a new group of Signature Stripe handbags and accessories. For March,
we will be launching a Coach fragrance in U.S. full price stores and
coach.com, as well as a new Hamptons Weekend collection, which will
include a distinctive patchwork design and a new striped group."
"We've never been more excited about the potential for the Coach
brand, led by North America, which represents over 70% of Coach sales.
First, we see the category continuing to grow at a double digit pace,
fueled primarily by a secular shift in consumer purchasing, along with
increased retail space being devoted to the category and more entrants
- - both driving customer interest. Clearly, as the market leader, we
are in an excellent position to further capitalize on these long-term
trends."
"Second, the Coach brand has never been more vibrant. The
consistency of our growth across all of our channels and different
consumer segments over many years reflects the strength of the
franchise. Our diversified and loyal customer base continues to grow
while we obtain a larger share of her increasing accessories wardrobe.
This is evidenced in all of our reported store metrics, including the
growth in new customers entering the Coach franchise from all market
segments in both existing and new stores."
"Taken together, these factors point to a much larger market
opportunity - in terms of both addressable market size and in terms of
share - than we previously contemplated," Mr. Frankfort concluded.
The company announced that it now expects to open an incremental
10 retail stores in North America late in the fiscal year, taking the
full year total to 40, up from the 30 previously targeted. These
additional store openings are a result of the multi-store portfolio
deals with mall developers, announced previously. Therefore, this
spring Coach will now open a total of about 20 retail stores in the
U.S. The company will also be opening about 10 new locations in Japan
during the second half, for a full year total of about 20 net new
shops.
The company provided guidance for the second half of the fiscal
year, projecting sales of at least $1.24 billion and earnings per
diluted share of about $0.77, up about 23% and over 31%, respectively.
For the fiscal year 2007, the company expects to generate sales of
about $2.63 billion, an increase of nearly 25% from prior year, and
earnings per diluted share of about $1.71, representing an increase of
34% from prior year and ahead of the analysts' consensus of $1.67.
Coach will host a conference call to review these results at 8:30
a.m. (EST) today, January 23, 2007. 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 & Corporate
Communications. 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 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,
weekend and travel accessories, footwear, watches, outerwear, scarves,
sunwear, jewelry 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 30, 2006
and December 31, 2005
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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 30, December 31, December 30, December 31,
2006 2005 2006 2005
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Net sales $ 836,387 $ 650,336 $ 1,390,238 $ 1,099,287
Cost of sales 191,911 145,660 321,082 253,250
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Gross profit 644,476 504,676 1,069,156 846,037
Selling, general
and
administrative
expenses 282,489 230,734 509,503 426,986
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Operating income 361,987 273,942 559,653 419,051
Interest income,
net 7,888 6,990 14,477 12,877
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Income before
provision for
income taxes 369,875 280,932 574,130 431,928
Provision for
income taxes 142,402 106,758 221,041 164,139
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Net income $ 227,473 $ 174,174 $ 353,089 $ 267,789
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Net income per
share
Basic $ 0.62 $ 0.46 $ 0.96 $ 0.70
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Diluted $ 0.61 $ 0.45 $ 0.94 $ 0.69
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Shares used in
computing net
income per share
Basic 368,138 380,837 368,346 380,144
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Diluted 375,496 390,620 374,775 390,247
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COACH, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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At December 30, 2006, July 1, 2006 and December 31, 2005
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(in thousands)
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(unaudited)
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December 30, July 1, December 31,
2006 2006 2005
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ASSETS
Cash, cash equivalents and short
term investments $ 819,923 $ 537,565 $ 746,012
Receivables 125,099 84,361 123,045
Inventories 249,577 233,494 205,042
Other current assets 144,108 119,062 106,883
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Total current assets 1,338,707 974,482 1,180,982
Property and equipment, net 329,324 298,531 229,614
Long term investments - - 25,546
Other noncurrent assets 332,868 353,507 323,021
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Total assets $ 2,000,899 $1,626,520 $1,759,163
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LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable $ 82,094 $ 79,819 $ 87,732
Accrued liabilities 328,019 261,835 246,514
Subsidiary credit facilities 14,309 - 13,237
Current portion of long-term
debt 235 170 170
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Total current liabilities 424,657 341,824 347,653
Long-term debt 2,865 3,100 3,100
Other liabilities 90,479 92,862 48,434
Stockholders' equity 1,482,898 1,188,734 1,359,976
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Total liabilities and
stockholders' equity $ 2,000,899 $1,626,520 $1,759,163
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CONTACT: Coach
Analysts & Media:
Andrea Shaw Resnick, 212-629-2618
VP Investor Relations & Corporate Communications