Coach Reports Second Quarter Earnings Per Share of $0.50; up 46% and Ahead of Expectations; Raises Guidance for FY04.Business Editors 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 NYSE See: New York Stock Exchange : COH CoH City of Heroes (gaming) CoH Company of Heroes (game) COH City of Hope COH Court of Honor (Boy Scouts of America) COH Controlled Ovarian Hyperstimulation ), a leading marketer of modern classic American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of accessories, today announced a 46% increase in earnings per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share to $0.50 for its second fiscal quarter ended December December: see month. 27, 2003. This substantial increase in earnings from the prior year's second quarter reflected a 33% gain in net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight combined with operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: 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 assortment /as·sort·ment/ (ah-sort´ment) the random distribution of nonhomologous chromosomes to daughter cells in metaphase of the first meiotic division. as·sort·ment n. . 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 This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble 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 comp See comparison. 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 (1) See point of sale and packet over SONET. (2) "Parent over shoulder." See digispeak. POS - point of sale 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 capsule In botany, a dry fruit that opens when ripe. It splits from top to bottom into separate segments known as valves, as in the iris, or forms pores at the top (e.g., poppy), or splits around the circumference, with the top falling off (e.g., pigweed and plantain). 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 re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. 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 pastel (păstĕl`), artists' medium of chalk and pigment, tempered with weak gum water and usually molded in the form of sticks; also a work done in this medium. Pastel was in use in Italy in the 15th cent. and is doubtless much older. suedes trimmed with patent leather, and the popular patent gallery totes Totes (more fully Totes»ISOTONER) is a corporation that sells umbrellas, gloves, rubber rain boots, and other similar accessories. Its headquarters is in Cincinnati, Ohio. in great spring colors. For March, we're bringing back an expanded Hamptons Weekend and Soho Twill twill One of the three basic textile weaves (see weaving), distinguished by diagonal lines. In the simplest twill, the weft crosses over two warp yarns, then under one, the sequence being repeated in each succeeding shot (row), but stepped over, one warp either to the 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 accessory, in criminal law, a person who, though not present at the commission of a crime, becomes a participator in the crime either before or after the fact of commission. wardrobe A wardrobe (sometimes called an "armoire") is a cabinet used for storing clothes. The earliest wardrobe was a chest, and it was not until some degree of luxury was attained in regal palaces and the castles of powerful nobles that separate accommodation was provided for the while attracting a newer consumer who demonstrates strong repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. 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 au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: repurchase program, which expires in January 2006. Coach will host a conference call to review these results at 8:30 a.m. (EST EST electroshock therapy. EST abbr. electroshock therapy ) today, January 21, 2004. Interested parties may listen to the webcast by accessing www.coach.com/investors on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the or dialing into 1-888-405-2080 and asking for the Coach earnings call led by Andrea Shaw Resnick, VP of Investor Relations Investor relations The process by which the corporation communicates with its investors. . 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 New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , 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 Footwear consists of garments worn on the feet. It is worn for a variety of reasons, including protection against the environment, hygiene and adornment. Usually, socks and other hosiery are worn between the feet and the footwear, except for sandals and flip flops (thongs). , watches, outerwear, jewelry jewelry, personal adornments worn for ornament or utility, to show rank or wealth, or to follow superstitious custom or fashion. The most universal forms of jewelry are the necklace, bracelet, ring, pin, and earring. , sunwear, furniture and related accessories. Coach is sold worldwide through Coach stores, select department stores and specialty stores Noun 1. specialty store - a store that sells only one kind of merchandise shop, store - a mercantile establishment for the retail sale of goods or services; "he bought it at a shop on Cape Cod" , through the Coach catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. 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 New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol COH. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for a complete list of risk factors.
COACH, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
For the Quarters and Six Months Ended December 27, 2003 and
December 28, 2002
-----------------------------------------------------------
(in thousands, except per share data)
-------------------------------------
(unaudited)
-----------
QUARTER ENDED SIX MONTHS ENDED
------------------- -------------------
December December December December
27, 28, 27, 28,
2003 2002 2003 2002
-------- -------- -------- --------
Net sales $411,513 $308,523 $669,888 $501,314
Cost of sales 106,370 91,681 176,836 153,248
-------- -------- -------- --------
Gross profit 305,143 216,842 493,052 348,066
Selling, general and
administrative expenses 144,439 114,242 260,723 207,858
-------- -------- -------- --------
Operating income 160,704 102,600 232,329 140,208
Interest (income), net (466) (110) (871) (275)
-------- -------- -------- --------
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
-------- -------- -------- --------
Net income $ 95,438 $ 62,431 $137,767 $ 84,911
======== ======== ======== ========
Basic net income per share $ 0.52 $ 0.35 $ 0.75 $ 0.48
======== ======== ======== ========
Shares used in computing
basic net income per share 185,231 177,956 184,418 177,990
======== ======== ======== ========
Diluted net income per share $ 0.50 $ 0.34 $ 0.72 $ 0.46
======== ======== ======== ========
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
-------------------------------------
At December 27, 2003, June 28, 2003 and December 28, 2002
---------------------------------------------------------
(in thousands)
--------------
December June December
27, 28, 28,
2003 2003 2002
-------- -------- --------
(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
-------- -------- --------
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
-------- -------- --------
Total assets $861,282 $617,652 $567,290
======== ======== ========
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
-------- -------- --------
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
-------- -------- --------
Total liabilities and stockholders'
equity $861,282 $617,652 $567,290
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