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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): October 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 Incorporation) (Commission File Number) (IRS Employer
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 October 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 September 29, 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 compared
to the same period 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 period 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 October 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: October 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 October 23, 2007
Exhibit 99.1
Coach Reports First Quarter Earnings of $0.41, up 32% on a 28% Sales Increase
Maintains FY08 Guidance at $2.06; Up 22% from FY07
NEW YORK--(BUSINESS WIRE)--Oct. 23, 2007--Coach, Inc. (NYSE: COH), a
leading marketer of modern classic American accessories, today announced an
increase of 32% in earnings per diluted share on a continuing operations basis
to $0.41 for its first fiscal quarter ended September 29, 2007, up from $0.31
per diluted share a year ago. This substantial increase in earnings from the
prior year's first quarter reflected a 28% gain in net sales combined with
operating margin improvement.
In the first quarter, net sales were $677 million compared with the $529
million reported in the same period of the prior year. Net income rose 34% to
$155 million, or $0.41 per diluted share, compared with $115 million, or $0.31
per diluted share in the prior year.
Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc., said,
"Our excellent quarterly performance against a weakening retail landscape
reflects the strength of our brand and consumers' embrace of our new products
and categories. Within our own stores, it is also reflective of our ability to
execute service initiatives to drive conversion improvements."
"While we're well positioned for the holiday season, we are however
concerned with recent traffic trends in our North American retail stores
reflecting the retail environment and the unusually difficult comparisons with
last year. Thus, we believe it's prudent to be more conservative in our
comparable store sales guidance for the balance of the fiscal year. At the same
time, it's important to underscore our overall continuing positive outlook
including the delivery of a 20% revenue gain in this holiday quarter."
"Given the vitality of the Coach brand, category strength and our
diversified multi-channel, international business model, we're confident that
the sales and earnings guidance for the year, originally provided in July, can
still be achieved. In addition, our ability to act quickly and nimbly to curb
spending during a period of uncertain sales trends will ensure continued expense
leverage."
For the first fiscal quarter, operating income totaled $239 million, up 32%
from the $181 million reported in the comparable year ago period, while
operating margin rose to 35.3%, a 120 basis point improvement from the 34.1%
reported for the prior year. During the quarter, gross profit rose 28% to $518
million from $406 million a year ago. Gross margin was 76.6% versus 76.7% a year
ago. SG&A expenses as a percentage of net sales declined 130 basis points to
41.3%, compared to the 42.6% reported in the year-ago quarter.
First fiscal quarter sales results in each of Coach's primary channels of
distribution grew as follows:
-- Direct-to-consumer sales increased 26% to $508 million from $404
million last year. U.S. comparable store sales for the quarter rose
19.3%, with retail stores up 10.8% and factory store sales up 27.3%.
In Japan, sales rose 17% on a constant-currency basis, while dollar
sales rose 15% adjusted for a weaker yen. As projected, comparable
location sales in Japan rose at a low-single-digit rate for the
quarter.
-- Indirect sales increased 35% to $169 million in the first quarter from
the $125 million reported for the prior year. Coach enjoyed excellent
gains at POS for all indirect businesses, notably U.S. department
stores.
During the first quarter of fiscal 2008, the company opened 13 retail
stores and three factory stores in North America, bringing the total to 272
retail stores and 96 factory stores as of September 29, 2007. In addition, nine
retail stores and four factory stores were expanded. In Japan, Coach opened four
locations and expanded one, taking the total to 146 at the end of the quarter.
Mr. Frankfort continued, "Our first quarter results were fueled by
innovative transitional and new fall product. Each of our monthly introductions
was well received, starting in July with Chelsea, in a tiered offering. This was
followed by Hamptons and Legacy in August, and by a fresh group of belted Ergo
silhouettes in September. Also in September, our jewelry assortment was expanded
and was introduced into an all-store distribution. During October, we
successfully introduced Bleecker, our first new major lifestyle collection of
fiscal 2008. This collection, which was inspired by Coach's heritage, is
anchored by a new version of our iconic duffle sac."
"For Holiday, our Bleecker collection will remain a key focus, along with
our best-selling Carly handbag group, in multiple fabrics and colors. In
addition, a compelling assortment of handbags priced over $400, our
fastest-growing price segment, will be important in attracting the higher-end
consumer. Rounding out our holiday offering will be jewelry, fragrance and a
wide variety of gifts priced under $100."
"As mentioned, we have recently experienced weak traffic trends in our U.S.
retail stores, especially during the last several weeks. Importantly however,
improvements in conversion are offsetting these trends. In addition, our new
retail store volumes continue to surpass our initial projections both in
existing markets, such as Glendale, Arizona and in new markets, such as
Rochester, Minnesota."
"Although our Holiday quarter sales are back-end loaded, we believe that
it's appropriate to target comparable store sales of low single digits for our
North American retail stores, while we believe that our factory stores will
generate comps at least in the mid-teens, given the relative strength of traffic
in premium outlet centers."
For the fiscal year 2008 the company expects to generate sales of about
$3.17 billion, an increase of over 21% from prior year, and earnings per diluted
share of about $2.06, representing an increase of about 22%. The company
estimates second fiscal quarter sales of about $970 million, representing a
year-over-year increase of about 20% and earnings per diluted share of $0.68.
The company also announced that during the first fiscal quarter, it
repurchased and retired three million shares of its common stock at an average
cost of $43.72. At the end of the period, $368 million was available under the
company's current repurchase authorization.
Coach will host a conference call to review first fiscal quarter results at
8:30 a.m. (ET) today, October 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, SVP 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, fragrance, 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,"
"target," "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 Ended September 29, 2007 and September 30, 2006
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(in thousands, except per share data)
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(unaudited)
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QUARTER ENDED
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September 29, September 30,
2007 2006
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Net sales $ 676,718 $ 529,421
Cost of sales 158,497 123,416
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Gross profit 518,221 406,005
Selling, general and
administrative expenses 279,463 225,351
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Operating income 238,758 180,654
Interest income, net 14,996 6,589
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Income before provision for income taxes
and discontinued operations 253,754 187,243
Provision for income taxes 98,968 72,004
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Income from continuing operations 154,786 115,239
Income from discontinued operations,
net of income taxes 20 10,377
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Net income $ 154,806 $ 125,616
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Net income per share
Basic
Continuing operations $ 0.42 $ 0.31
Discontinued operations 0.00 0.03
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Net income $ 0.42 $ 0.34
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Diluted
Continuing operations $ 0.41 $ 0.31
Discontinued operations 0.00 0.03
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Net income $ 0.41 $ 0.34
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Shares used in computing
net income per share
Basic 372,186 368,171
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Diluted 379,285 373,672
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COACH, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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At September 29, 2007, June 30, 2007 and September 30, 2006
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(in thousands)
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September June 30, September
29, 30,
2007 2007 2006
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ASSETS (unaudited) (unaudited)
Cash, cash equivalents and short
term investments $1,235,356 $1,185,816 $ 456,333
Receivables 148,942 107,814 118,082
Inventories 363,049 291,192 300,855
Other current assets 138,550 155,374 148,137
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Total current assets 1,885,897 1,740,196 1,023,407
Property and equipment, net 400,807 368,461 320,996
Other noncurrent assets 390,183 340,855 332,097
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Total assets $2,676,887 $2,449,512 $1,676,500
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LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable $ 95,438 $ 109,309 $ 86,173
Accrued liabilities 308,092 298,452 301,155
Subsidiary credit facilities - - 7,380
Current portion of long-term debt 285 235 235
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Total current liabilities 403,815 407,996 394,943
Long-term debt 2,580 2,865 2,865
Other liabilities 268,493 128,297 86,580
Stockholders' equity 2,001,999 1,910,354 1,192,112
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Total liabilities and
stockholders' equity $2,676,887 $2,449,512 $1,676,500
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CONTACT: Coach, Inc.
Analysts & Media:
Andrea Shaw Resnick, 212-629-2618
SVP Investor Relations & Corporate Communications