Coach Reports Second Quarter Earnings Per Share of $0.68; Up 39% and Ahead of Expectations; Raises Guidance for FY03.Business Editors NEW YORK--(BUSINESS WIRE)--Jan. 22, 2003 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 ) Results Driven by a 31% Sales Gain and Continued Margin Expansion Coach, Inc. (NYSE: COH), 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 39% 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 $0.68 for its second fiscal quarter ended December December: see month. 28, 2002. This substantial increase in earnings from the prior year's second quarter reflected a 31% 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 $308.5 million, 31% higher than the $235.8 million reported in the same period of the prior year. Net income rose 41% to $62.4 million, or $0.68 per share, compared with $44.2 million, or $0.49 per share the prior year. These results were ahead of the analysts' recently revised consensus estimate of $0.66 per share. Lew a. 1. Lukewarm; tepid. Frankfort Frankfort, city (1990 pop. 25,968), state capital and seat of Franklin co., N central Ky., on both sides of the Kentucky River, in the heart of the bluegrass country; inc. 1796. , Chairman and Chief Executive Officer of Coach, Inc., said, "Our strong second quarter sales demonstrated sustained momentum in all areas of our business across all geographies. These results reflect the vibrancy vi·brant adj. 1. a. Pulsing or throbbing with energy or activity: the vibrant streets of a big city. b. of the Coach brand as we continue to grow market share in the US and Japan. Further, our earnings evidenced our stable retail pricing policy, improved manufacturing margins and our ability to leverage our expenses despite the promotional retail environment." During the quarter, gross profit rose 34% to $216.8 million from $161.6 million a year ago. Gross margin expanded by 170 basis points from 68.6% to 70.3%, driven by sourcing cost initiatives, product mix, and channel mix. SG&A expenses as a percentage of net sales declined to 37.0%, a 190 basis point decrease from the 38.9% reported in the year-ago quarter, primarily due to leveraging the higher sales. For the six months ended December 28, 2002, net sales were $501.3 million, up 30% from the $386.5 million reported in the first six months of fiscal 2002. Net income rose to $84.9 million, up 50% from the $56.7 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 19% to $191.5 million from $160.5 million last year. Comparable store sales for the quarter rose 12.7%, with retail stores up 18.1% and factory store sales up 5.8%. - Indirect sales rose 56% to $117.1 million from $75.3 million in the same period last year. All indirect businesses including Coach Japan, US department stores, international wholesale and special markets, contributed to this significant increase. Mr. Frankfort added, "Our full-priced business was especially strong this holiday. In US retail, our seasonal theme of Perfect Presents, which focused on 12 key item groups across a wide range of prices, resonated particularly well with the consumer. In our indirect segment, we saw momentum continuing in 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. . During the fall season to date - our fiscal first half - Coach's handbag and 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. market share in department stores increased significantly, with POS (1) See point of sale and packet over SONET. (2) "Parent over shoulder." See digispeak. POS - point of sale sales rising 30% from prior year levels." "We were also pleased with our performance in Japan, as comparable locations posted double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. sales gains, and our results in new shops, including the Ginza Gin·za A major shopping and entertainment district of Tokyo, Japan. flagship, exceeded our original projections." During the second quarter of fiscal 2003, the company opened six Coach retail stores, bringing the total to 150 retail stores and 76 factory stores at December 28, 2002. In addition, one store was 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 expanded. Through Coach Japan, four net locations were added in Japan, bringing the total to 89. "Our holiday momentum has continued into January with strong response to new styles and colors in the Hamptons Leather and Signature groups, and in updated spring accessories," Mr. Frankfort added. "Arriving next week will be a fresh interpretation of Signature handbags and accessories, featuring a subtle mini logo pattern. We will also be expanding 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). to 20 additional retail stores shortly, bringing total locations carrying footwear to about 80. For March, we're introducing two new groups - 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 and Hamptons Weekend - which are expected to increase Coach's appeal in the casual, weekend market." "This spring, as planned, we will add seven more retail stores in the U.S., bringing the total to 20 new retail stores in fiscal 2003. We will also be adding at least six new locations in Japan during the second half, including our second flagship store in the Shibuya area of Tokyo, further leveraging our opportunity in this under-penetrated market." "Most broadly, we're confident that the accelerated market share growth that Coach has been enjoying is sustainable. Our brand is vital and our franchise continues to expand by obtaining a larger share of our existing user's accessory 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. Our key growth strategies will enable us to build upon our position as a leading American accessible luxury brand in calendar 2003 and in the years ahead," Mr. Frankfort concluded. The company now estimates full fiscal year 2003 sales of at least $900 million, an increase of 25% from prior year, and earnings per share of at least $1.40, compared with analysts' current consensus estimate of $1.33. This reflects earnings per share of at least $0.48 for the second half of the fiscal year, up over 40% from the $0.34 reported for the same period in fiscal 2002 and above the analysts' consensus estimate of $0.42. 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 22, 2003. 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 1-888-455-0032 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 1-800-294-6360. 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, 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 catalogue 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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Thirteen and Twenty-Six Weeks Ended December 28, 2002
and December 29, 2001
(in thousands, except per share data)
(unaudited)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
--------------------- ----------------------
December December December December
28, 29, 28, 29,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net sales $ 308,523 $ 235,750 $ 501,314 $ 386,452
Cost of sales 91,681 74,132 153,248 128,263
---------- ---------- ---------- ----------
Gross profit 216,842 161,618 348,066 258,189
Selling, general and
administrative expenses 114,242 91,677 207,858 168,778
---------- ---------- ---------- ----------
Operating income 102,600 69,941 140,208 89,411
Interest
(income)/expense, net (110) 221 (275) 668
---------- ---------- ---------- ----------
Income before income
taxes and minority
interest 102,710 69,720 140,483 88,743
Provision for income
taxes 38,003 24,752 51,980 31,505
Minority interest, net of
tax 2,276 802 3,592 534
---------- ---------- ---------- ----------
Net income $ 62,431 $ 44,166 $ 84,911 $ 56,704
========== ========== ========== ==========
Basic net income per
share $ 0.70 $ 0.51 $ 0.95 $ 0.65
========== ========== ========== ==========
Shares used in computing
basic net income per
share 88,978 87,380 88,995 87,404
========== ========== ========== ==========
Diluted net income per
share $ 0.68 $ 0.49 $ 0.92 $ 0.63
========== ========== ========== ==========
Shares used in computing
diluted net income per
share 91,931 89,413 92,103 89,864
========== ========== ========== ==========
Note - The effect of the July 3,2002 two-for-one stock split has
been retroactively applied to all periods presented.
COACH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
At December 28, 2002, June 29, 2002 and December 29, 2001
(in thousands)
December June December
28, 29, 29,
2002 2002 2001
---------- ---------- ----------
(unaudited) (unaudited)
ASSETS
Cash $ 171,141 $ 93,962 $ 66,523
Receivables 67,284 30,925 29,139
Inventories 135,908 136,404 115,424
Other current assets 25,855 26,297 31,362
---------- ---------- ----------
Total current assets 400,188 287,588 242,448
Property, net 104,404 90,589 81,776
Trademarks and other assets 62,698 62,394 44,562
---------- ---------- ----------
Total assets $ 567,290 $ 440,571 $ 368,786
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 34,205 $ 25,819 $ 21,980
Accrued liabilities 128,740 99,365 97,657
U.S. revolving credit facility - - -
Subsidiary credit facilities 42,504 34,169 15,917
Long-term debt due within 1 year 80 75 75
---------- ---------- ----------
Total current liabilities 205,529 159,428 135,629
Long-term debt 3,535 3,615 3,615
Other liabilities 4,036 2,625 3,019
Minority interest 18,139 14,547 14,897
Common stockholders' equity 336,051 260,356 211,626
---------- ---------- ----------
Total liabilities and stockholders'
equity $ 567,290 $ 440,571 $ 368,786
========== ========== ==========
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