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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): July 31, 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
(Address of principal executive offices) (Zip Code)
(212) 594-1850
(Registrant's telephone number, including area code)
Item 2.02: Results of Operations and Financial Condition.
On July 31, 2007, Coach, Inc. (the "Company") issued a press release (the
"Press Release") in which the Company announced its financial results for its
fiscal quarter and fiscal year ended June 30, 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 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 year and
compared to the same periods 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 operating and financial results and
how such results compare with the Company's prior guidance.
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 July 31, 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: August 2, 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 July 31, 2007
Exhibit 99.1
Coach Reports Fourth Quarter Earnings Per Share
of $0.42, up 43%; Raises Guidance for FY08
Increases FY08 Guidance to At Least $2.06; Up 22% from FY07
NEW YORK--(BUSINESS WIRE)--July 31, 2007--Coach, Inc. (NYSE: COH),
a leading marketer of modern classic American accessories, today
announced a 43% increase in earnings per diluted share on a continuing
operations basis for its fourth fiscal quarter ended June 30, 2007.
For the full fiscal year, earnings per share increased to $1.69, up
41% versus the prior fiscal year on the same continuing operations
basis.
During the fourth quarter, net sales were $652 million, 30% higher
than the $502 million generated in the prior year's fourth quarter.
Net income rose 41% to $159 million, or $0.42 per diluted share,
compared with $113 million, or $0.29 per share, in the prior year. For
the fiscal year 2007, net sales were $2.61 billion, up 28% from the
$2.04 billion recorded in fiscal year 2006. Net income rose to $637
million, up 37% from the $464 million earned in the prior year.
Diluted earnings per share rose 41% to $1.69, versus $1.19 a year ago.
Lew Frankfort, Chairman and Chief Executive Officer of Coach,
Inc., said, "We're extremely pleased with our fiscal fourth quarter
and full year results. This quarter's performance demonstrated a
continuation of the strength we have seen throughout the year as our
market share continued to grow across all channels and geographies.
Our performance also reflects the vibrancy of the premium handbag and
accessory category in North America, where we continue to see
significant growth."
Quarterly operating income totaled $245 million, up 43% from the
$172 million reported in the comparable year ago period, while
operating margin rose to 37.6%, a 330 basis point improvement from the
34.3% reported for the prior year. During the quarter, gross profit
rose 29% to $509 million from $394 million a year ago. Gross margin
was 78.1% versus 78.5% in the prior year. SG&A expenses as a
percentage of net sales declined 360 basis points to 40.5%, compared
to the 44.1% reported in the year-ago quarter. For the full year,
operating income rose 39% to $993 million, while operating margin rose
to 38.0%, a 290 basis point increase from the 35.1% reported for FY06.
During the year, gross profit rose 28% to $2.02 billion, as compared
to $1.58 billion a year ago. Gross margin was 77.4% versus 77.7%,
while SG&A expenses as a percentage of net sales declined 320 basis
points from 42.6% to 39.4%.
Fourth fiscal quarter and full year sales grew in each of Coach's
primary channels of distribution as follows:
-- Direct-to-consumer sales increased 29% to $541 million in the
fourth quarter from $419 million last year. North American
comparable store sales for the quarter rose 20.2%, with retail
stores up 11.6% and factory store sales up 31.2%. In Japan,
sales rose 23% on a constant-currency basis, while dollar
sales rose 17%, reflecting the weaker yen. Coach achieved
high-single-digit increases in comparable location sales in
Japan for the quarter.
For the full year, direct to consumer sales rose 30% to $2.10
billion from $1.61 billion generated in fiscal 2006. Overall, North
American comparable store sales for the fiscal year increased 22.3%,
with retail stores up 16.4% and factory stores up 30.0%, while
comparable location sales in Japan rose mid-single-digit. For the
year, sales in Japan rose 19% on a constant-currency basis, while
dollar sales rose 16%, impacted by the exchange rate.
-- Indirect sales on a continuing operations basis increased 34%
to $111 million in the fourth quarter from the $83 million
reported for the prior year. For the year, indirect sales on a
continuing operations basis rose 20% to $511 million, up from
$424 million recorded for fiscal 2006. Results for the quarter
and fiscal year reflected strong gains in U.S. department
stores where sales at POS rose about 30% in both periods. In
addition, sales at retail increased at a double-digit pace at
International Wholesale locations.
Mr. Frankfort added, "The strength of our fourth quarter results
was reflected in all of our businesses. Our successful spring and
summer collections drove our performance, as we continued to improve
productivity through our well received product offerings. In April,
Ergo, the third new lifestyle platform of 2007, was introduced in
North America with considerable success. For May, we launched a new
summer program, featuring a Legacy Cotton Signature assortment, which
was built on the success of last year's small capsule group. In June,
Patchwork, a perennial favorite, returned across a variety of Ergo
silhouettes along with new styles and fabrications in Signature
Stripe."
"For July, we successfully introduced an expanded collection of
Chelsea handbags, including novelty and limited edition styles. Last
week we installed our August floorset, featuring Hamptons and Legacy.
Hamptons, appealing to the more classic consumer, is anchored by our
best-selling carryall updated with improved function and new detailing
in lightweight leathers and Signature. The Legacy line debuted last
October; this fall's version features unique new shapes and a fresh
color palette. In September, we will introduce a belted version of
Ergo with hardware in a range of fabrications, including several
sophisticated patchwork styles inspired by early 20th century art.
Importantly, we will also be launching an expanded jewelry offering
across all geographies, inspired by the success of the capsule
collection introduced last holiday to select North American Coach
Stores."
"In Japan, we were particularly pleased with our outstanding sales
and market share growth in both the fourth quarter and for the year,
which we achieved despite continued softness in the imported
accessories market. Our rapidly expanding sales in Japan reflect the
success of our distribution strategy, and demonstrate how well the
Coach proposition resonates with the stylish Japanese consumer. This
was clearly evidenced by the success of Ergo, reflecting the appeal of
these lightweight leather handbags with minimal hardware."
During the fourth quarter of fiscal 2007, the company opened 15
North American Coach retail stores - including two in new markets for
Coach - and three factory stores, bringing the total to 259 retail
stores and 93 factory stores at June 30, 2007. This was a net increase
of 41 Coach retail stores from the 218 in operation a year ago. In
Japan, six new locations were opened in the fourth quarter, bringing
the total to 142 at fiscal year end. This was a net increase of 20
locations from the 122 at year-end 2006.
Mr. Frankfort noted, "As usual, our overall sales growth in 2008
will be driven by both distribution - through new and expanded stores
- - and higher productivity - fueled by product innovation and excellent
service. During FY08, we will open about 40 new North American retail
stores, at least six U.S. factory outlets, and 15-20 new locations in
Japan, along with expanding key locations in both geographies. In
addition, we expect to open about 30 international wholesale
locations, working with our distributors, including at least five in
Mainland China."
"Building on the success of new products introduced in 2007, we're
enthusiastic about three lifestyle platforms that we will be launching
this year. The first, Bleecker, arriving in October, will offer
consumers a fresh interpretation of bags and accessories inspired by
our best selling icons and anchored by our original duffle, first
introduced in 1973. It's crafted from hand-burnished leather and
features our archival Heritage Logo, proprietary Coach hardware and a
new tattersall lining. 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. And next April, we will re-launch a long time favorite,
Soho, in new shapes and materials with reinterpreted signature
detailing."
"While fiscal 2008 has just begun, our strong start bodes well for
the year. We're confident that our proven growth strategies, built
upon our leadership position, will continue to deliver excellent
returns in the seasons ahead and over our planning horizon," Mr.
Frankfort concluded.
Coach updated guidance for fiscal 2008 and now estimates sales of
about $3.16 billion for the year, an increase of about 21%. Operating
income is expected to rise about 23% with an operating margin
improvement of at least 50 basis points. Earnings per share are
forecasted to rise to at least $2.06, up about 22% from last year.
In addition, the company introduced its first fiscal quarter
outlook, with sales targeted to be at about $655 million, an increase
of over 23%, and earnings per share projected to be about $0.39, a
gain of over 25%.
Coach will host a conference call to review these results at 8:30
a.m. (EDT) today, July 31, 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. 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 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.
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COACH, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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For the Quarters and Years Ended June 30, 2007 and July 1, 2006
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(in thousands, except per share data)
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(unaudited)
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QUARTER ENDED YEAR ENDED
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June 30, July 1, June 30, July 1,
2007 2006 2007 2006
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Net sales $652,129 $501,573 $2,612,456 $2,035,085
Cost of sales 142,853 108,054 589,470 453,518
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Gross profit 509,276 393,519 2,022,986 1,581,567
Selling, general and
administrative expenses 263,875 221,348 1,029,589 866,860
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Operating income 245,401 172,171 993,397 714,707
Interest income, net 13,808 9,628 41,273 32,623
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Income before provision for
income taxes
and discontinued operations 259,209 181,799 1,034,670 747,330
Provision for income taxes 99,806 69,004 398,141 283,490
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Income from continuing
operations 159,403 112,795 636,529 463,840
Income from discontinued
operations,
net of income taxes 1,209 4,847 27,136 30,437
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Net income $160,612 $117,642 $ 663,665 $ 494,277
======== ======== ========== ==========
Net income per share
Basic
Continuing operations $ 0.43 $ 0.30 $ 1.72 $ 1.22
Discontinued operations $ 0.00 $ 0.01 $ 0.07 $ 0.08
-------- -------- ---------- ----------
Net income $ 0.43 $ 0.31 $ 1.80 $ 1.30
======== ======== ========== ==========
Diluted
Continuing operations $ 0.42 $ 0.29 $ 1.69 $ 1.19
Discontinued operations $ 0.00 $ 0.01 $ 0.07 $ 0.08
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Net income $ 0.42 $ 0.31 $ 1.76 $ 1.27
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Shares used in computing net
income per share
Basic 371,565 376,706 369,661 379,635
======== ======== ========== ==========
Diluted 380,462 384,227 377,356 388,495
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COACH, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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At June 30, 2007 and July 1, 2006
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(in thousands)
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(unaudited)
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June 30, July 1,
2007 2006
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ASSETS
Cash, cash equivalents and short term
investments $1,185,816 $ 537,565
Receivables 107,814 84,361
Inventories 291,192 233,494
Other current assets 155,374 119,062
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Total current assets 1,740,196 974,482
Property and equipment, net 368,461 298,531
Other noncurrent assets 340,855 353,507
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Total assets $2,449,512 $1,626,520
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 109,309 $ 79,819
Accrued liabilities 298,452 261,835
Current portion of long-term debt 235 170
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Total current liabilities 407,996 341,824
Long-term debt 2,865 3,100
Other liabilities 128,297 92,862
Stockholders' equity 1,910,354 1,188,734
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Total liabilities and stockholders' equity $2,449,512 $1,626,520
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CONTACT: Analysts & Media:
Coach
Andrea Shaw Resnick, 212-629-2618
VP Investor Relations and Corporate Communications