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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): April 24, 2007
Coach, Inc.
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(Exact name of registrant as specified in its charter)
Maryland 1-16153 52-2242751
- -------------- ------- ----------
(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 April 24, 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 March 31, 2007. 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, net income and earnings per share have been
presented (for the fiscal quarter and nine-month period to date in the
current and prior fiscal year) both with and without the contribution
of operations that were discontinued during the fiscal quarter.
o Direct-to-consumer sales for Japan have been presented both including
and excluding currency fluctuation effects from translating Japanese
yen-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 information as described above will allow investors to
better understand the Company's continuing operating and financial
results and how such results compare with the Company's prior
guidance.
o Presenting the sales, income and earnings information both with and
without the contribution of discontinued operations will allow
investors to more clearly understand the impact on the Company's
operating results of discontinuing these operations; to further
clarify this impact, a "supplemental information" table is also
included in the press release, showing the pro forma impact on net
sales, net income and earnings per share from discontinued operations
during each of the last seven fiscal quarters.
o Presenting Japan sales both including and excluding currency
fluctuation effects 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 April 24, 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: April 24, 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 April 24, 2007
Exhibit 99.1
Coach Reports Third Quarter Earnings Growth of 50% on Sales Growth of 30%
Ahead of Analysts' Expectations
NEW YORK--(BUSINESS WIRE)--April 24, 2007--Coach, Inc. (NYSE: COH), a
leading marketer of modern classic American accessories, today announced an
increase of 50% in earnings per diluted share on a continuing operations basis
to $0.39 for its third fiscal quarter ended March 31, 2007, up from $0.26 per
diluted share a year ago on the same basis. During the quarter, the Company
ceased operations of its Corporate Accounts business in order to better control
the location and image of the brand where Coach product is sold. Including the
contribution of these discontinued operations, earnings per share rose 42% to
$0.40 as compared to $0.28 reported a year ago, ahead of analysts' expectations
of $0.38.
In the third quarter, on a continuing operations basis, net sales rose 30%
to $625 million from the $480 million generated on the same basis in the prior
year. Net income rose 45% to $147 million, compared with $102 million in the
prior year. Total net sales in the quarter, including discontinued operations,
were $633 million, 27% higher than the $498 million reported in the same period
of the prior year while net income rose 38% to $150 million up from $109
million.
Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc., said,
"We had another terrific quarter where our business grew significantly against a
backdrop of sustained, rapid category growth. Our third quarter results exceeded
our expectations, driven by the overall strength of the brand, great product
performance and continued expansion in the North American handbag and small
leathergoods market. Throughout all channels of our business and across all
geographies, consumers enthusiastically embraced our transitional and spring
assortments, driving our top-line results. Our profitability improvement
highlights our ability to achieve further operating margin expansion as our
sales base increases."
"Separately, as noted, during the quarter we made the decision to exit our
small Corporate Accounts business, through which Coach sold products primarily
to distributors for gift-giving and incentive programs. This action was
implemented to curtail product diversion and to ensure that we have control over
the locations where Coach product is ultimately sold."
Quarterly operating margin on a continuing basis rose to 36.2% in the
current period, a 420 basis point improvement from the 32.0% achieved in the
prior year on the same basis. During the quarter, gross profit rose 29% to $486
million from $376 million a year ago. Gross margin rate continued to be
exceptionally high at 77.8% versus 78.4% in the prior year. SG&A expenses as a
percentage of net sales declined 490 basis points to 41.5%, compared to 46.4% a
year ago.
For the nine months ended March 31, 2007, on a continuing operations basis,
sales rose 28% to $1.960 billion from $1.534 billion a year ago, while net
income rose 36% to $477 million from $351 million on the same basis. Total net
sales for the nine months, including discontinued operations, were $2.024
billion, up 27% from the $1.597 billion reported in the first nine months of
fiscal 2006. Net income rose to $503 million, up 34% from the $377 million
reported a year ago, on this basis.
Please see supplemental data table that follows this narrative for further
details regarding discontinued operations.
Third fiscal quarter sales results in each of Coach's primary channels of
distribution grew as follows:
-- Direct-to-consumer sales increased 29% to $481 million from $374
million last year. U.S. comparable store sales for the quarter rose
20.0%, with retail stores up 15.1% and factory store sales up 26.6%.
In Japan, sales rose 15% on a constant-currency basis, while dollar
sales rose 13% reflecting the decline in the yen. As projected, Coach
achieved low-single-digit increases in comparable location sales in
Japan.
-- Indirect sales on a continuing basis rose 36% to $144 million from
$106 million in the same period last year. Strong U.S. wholesale
shipments were the primary contributor to these results while
international wholesale shipments rose significantly as well. In the
United States, comparable department store POS sales rose over 30%
from prior year levels in the quarter.
Mr. Frankfort added, "It's worth noting that U.S. full price comparable
store sales have now increased at a double-digit rate in each of the last 20
consecutive quarters, which demonstrates the consistency and sustainability of
our growth. Clearly, Coach's share of the fast-growing U.S. premium accessories
market continues to expand across all channels."
"In addition, we're pleased with the 15% growth in sales in constant
currency in Japan this quarter, as we continue to grow our market share in this
market. These results reflect the success of our distribution strategy in Japan,
notably the acceleration of retail openings and the expansion of existing
shops."
During the third quarter of fiscal 2007, the company opened seven U.S.
retail stores - three in new markets for Coach, bringing the total to 244 retail
stores and 90 factory stores at March 31, 2007. In Japan, Coach opened five new
retail locations and expanded three locations as well.
Mr. Frankfort continued, "As always, bags and women's accessories drove our
performance. Early in the quarter we enhanced our Legacy collection with the
successful introduction of Carly as a key item concept. We were also pleased
with the performance of our updated Hamptons and Soho collections. Signature
Stripe, our first new lifestyle collection of this fiscal year, was refreshed
with a colorful spring palette and achieved excellent results. We were also
delighted with the reception to our new Coach fragrance, which launched in early
March and represented above 3% of our retail sales in that period."
"Our business in April has continued very strong, as we completed the
introduction of Ergo, our third major new lifestyle platform for fiscal 2007,
with considerable success. Other introductions in April are our watercolor
stripe group which compliments the Hamptons Weekend collection, our popular
straw baskets and our best selling Legacy silhouettes offered in a chic neutral
canvas. For Mother's Day, we're featuring a Legacy Cotton Signature assortment,
building on the success of last year's small capsule group. Coming in June will
be Patchwork across a variety of Ergo silhouettes and new styles and
fabrications in Signature Stripe. Also in the fourth quarter, we will be adding
14 more retail stores in the U.S., bringing the total to 40 new retail stores in
fiscal 2007."
Mr. Frankfort concluded, "We're particularly enthusiastic about the two new
lifestyle platforms which we're planning to introduce during fiscal 2008. First,
the lightweight Bleecker collection, arriving in October, is inspired by Coach's
rich tradition of authenticity and American style, and is crafted from
hand-burnished leather. It features our archival Heritage Logo, iconic Coach
hardware, braided lacing strap detail and a new tattersall lining. And the
second platform for FY08 is the Heritage Stripe collection, an assortment of
durable coated cotton canvas totes, bags and accessories, which we expect to
fully launch during early spring."
The company now estimates fiscal 2007 sales from continuing operations of
at least $2.6 billion for the full fiscal year ending June 30, 2007, an increase
of 28% from the $2.035 billion in the prior year, and earnings per share of
$1.67, or up 40% from last year's $1.19 on the same basis. This compares with
the analysts' current consensus of $1.72, which Coach estimates included a $0.10
contribution from discontinued operations, resulting in an adjusted consensus
estimate of $1.62 on a continuing operations basis for FY07. The company's
guidance for the fiscal year reflects sales of $640 million and earnings per
share of $0.40 for the fourth quarter, up 36% from the $0.29 reported for the
fourth quarter in fiscal 2006.
For fiscal 2008, on a continuing operations basis, Coach projects sales
growth of about 20% to at least $3.1 billion and earnings per share growth of at
least 21% to at least $2.02. This compares with the analysts' consensus of
$2.09, which Coach estimates included an $0.11 contribution from discontinued
operations, resulting in an adjusted consensus estimate of $1.98 on a continuing
operations basis for FY08.
Coach will host a conference call to review these results at 8:30 a.m.
(EDT) today, April 24, 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 for the replay 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, 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 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 Nine Months Ended March 31, 2007 and April 1,
2006
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(in thousands, except per share data)
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(unaudited)
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QUARTER ENDED NINE MONTHS ENDED
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March 31, April 1, March 31, April 1,
2007 2006 2007 2006
----------- ----------- ----------- -----------
Net sales $625,303 $479,718 $1,960,327 $1,533,512
Cost of sales 138,893 103,519 446,617 345,464
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Gross profit 486,410 376,199 1,513,710 1,188,048
Selling, general and
administrative
expenses 259,783 222,523 765,714 645,512
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Operating income 226,627 153,676 747,996 542,536
Interest income, net 12,988 10,118 27,465 22,995
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Income before
provision for income
taxes and
discontinued
operations 239,615 163,794 775,461 565,531
Provision for income
taxes 92,225 62,122 298,335 214,486
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Income from
continuing
operations 147,390 101,672 477,126 351,045
Income from
discontinued
operations, net of
income taxes 2,574 7,174 25,927 25,590
----------- ----------- ----------- -----------
Net income $149,964 $108,846 $503,053 $376,635
=========== =========== =========== ===========
Net income per share
Basic
Continuing
operations $0.40 $0.26 $1.29 $0.92
Discontinued
operations 0.01 0.02 0.07 0.07
----------- ----------- ----------- -----------
Net income $0.41 $0.28 $1.36 $0.99
=========== =========== =========== ===========
Diluted
Continuing
operations $0.39 $0.26 $1.27 $0.90
Discontinued
operations 0.01 0.02 0.07 0.07
----------- ----------- ----------- -----------
Net income $0.40 $0.28 $1.34 $0.96
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Shares used in
computing net income
per share
Basic 370,264 383,739 369,039 381,330
=========== =========== =========== ===========
Diluted 379,289 391,453 376,334 390,637
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COACH, INC.
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QUARTERLY SUPPLEMENTAL INFORMATION FOR FISCAL YEAR 2006, FISCAL YEAR
2007 YEAR-TO-DATE
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RECONCILIATION OF DISCONTINUED OPERATIONS
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(in thousands, except per share data)
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(unaudited)
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Supplemental
Information:
FY07
-----------------------------------------
Q1 Q2 Q3 YTD
--------- --------- --------- -----------
Net sales from
continuing
operations $529,421 $805,603 $625,303 $1,960,327
Add: sales from
discontinued
operations 24,430 30,784 8,149 63,363
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Net sales
including
discontinued
operations $553,851 $836,387 $633,452 $2,023,690
========= ========= ========= ===========
Net income from
continuing
operations $115,239 $214,497 $147,390 $477,126
Add: income from
discontinued
operations 10,377 12,976 2,574 25,927
--------- --------- --------- -----------
Net income
including
discontinued
operations $125,616 $227,473 $149,964 $503,053
========= ========= ========= ===========
Diluted EPS from
continuing
operations $0.308 $0.571 $0.389 $1.268
Add: EPS from
discontinued
operations 0.028 0.035 0.007 0.069
--------- --------- --------- -----------
EPS including
discontinued
operations $0.336 $0.606 $0.395 $1.337
========= ========= ========= ===========
FY06
-----------------------------------------------------
Q1 Q2 Q3 Q4 FY06
--------- --------- --------- ----------- -----------
Net sales from
continuing
operations $433,964 $619,830 $479,718 $501,573 $2,035,085
Add: sales from
discontinued
operations 14,987 30,506 18,141 12,782 76,416
--------- --------- --------- ----------- -----------
Net sales
including
discontinued
operations $448,951 $650,336 $497,859 $514,355 $2,111,501
========= ========= ========= =========== ===========
Net income from
continuing
operations $87,860 $161,513 $101,672 $112,795 $463,840
Add: income from
discontinued
operations 5,755 12,661 7,174 4,847 30,437
--------- --------- --------- ----------- -----------
Net income
including
discontinued
operations $93,615 $174,174 $108,846 $117,642 $494,277
========= ========= ========= =========== ===========
Diluted EPS from
continuing
operations $0.225 $0.413 $0.260 $0.294 $1.194
Add: EPS from
discontinued
operations 0.015 0.032 0.018 0.013 0.078
--------- --------- --------- ----------- -----------
EPS including
discontinued
operations $0.240 $0.446 $0.278 $0.306 $1.272
========= ========= ========= =========== ===========
COACH, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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At March 31, 2007, July 1, 2006 and April 1, 2006
- ----------------------------------------------------------------------
(in thousands)
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(unaudited)
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March 31, July 1, April 1,
2007 2006 2006
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ASSETS
Cash, cash equivalents and short
term investments $936,174 $537,565 $838,357
Receivables 124,858 84,361 110,415
Inventories 249,818 233,494 210,465
Other current assets 155,414 119,062 118,652
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Total current assets 1,466,264 974,482 1,277,889
Property and equipment, net 344,659 298,531 269,562
Other noncurrent assets 332,272 353,507 326,979
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Total assets $2,143,195 $1,626,520 $1,874,430
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LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable $62,113 $79,819 $54,841
Accrued liabilities 275,916 261,835 241,136
Current portion of long-term debt 235 170 170
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Total current liabilities 338,264 341,824 296,147
Long-term debt 2,865 3,100 3,100
Other liabilities 96,620 92,862 60,337
Stockholders' equity 1,705,446 1,188,734 1,514,846
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Total liabilities and
stockholders' equity $2,143,195 $1,626,520 $1,874,430
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CONTACT: Coach
Analysts & Media:
Andrea Shaw Resnick, 212-629-2618
VP Investor Relations & Corporate Communications