Coach Reports Third Quarter Earnings Growth of over 34%; Ahead of Analysts' Expectations; Increases FY06 Guidance to $1.25, up 36% from Prior Year, and Introduces FY07 Guidance of $1.50; Ahead of Consensus for Both Years.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 -- 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 accessories, today announced an increase of 34% 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 $0.28 for its third fiscal quarter ended April 1, 2006, up from $0.21 per diluted share a year ago. These results were ahead of the analysts' consensus estimate of $0.27 per share. In the third quarter, 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 were $498 million, 20% higher than the $416 million reported in the same period of the prior year. On a constant-exchange-rate basis, net sales increased 23% in the third quarter, excluding the negative currency effects of 3% from translating foreign-denominated sales into U.S. dollars. Net income rose 35% to $109 million, compared with $81 million in the prior year. Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc., said, "Our excellent third quarter performance reflects the vitality vi·tal·i·ty n. 1. The capacity to live, grow, or develop. 2. Physical or intellectual vigor; energy. of the Coach franchise, the year-round appeal of Coach as a gift resource and the continuing strong growth of the U.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. category. 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 Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: expansion as our sales base increases." Quarterly operating margin rose to 33.2% in the current period, a 140 basis point improvement from the 31.8% reported for the prior year. During the quarter, gross profit rose 20% to $390 million from $325 million a year ago. Gross margin expanded by 20 basis points from 78.1% to 78.3%, as gains from product mix shifts and supply chain initiatives more than offset the impact of channel mix. SG&A expenses as a percentage of net sales declined 110 basis points to 45.1%, compared to the 46.2% reported in the year-ago quarter. For the nine months ended April 1, 2006, net sales were $1.6 billion, up 24% from the $1.3 billion reported in the first nine months of fiscal 2005. On a constant-exchange-rate basis, net sales increased 26%, excluding the negative currency effects of 2% from translating foreign-denominated sales into U.S. dollars. Net income rose to $377 million, up 40% from the $269 million reported a year ago. Third fiscal quarter sales results in each of Coach's primary channels of distribution grew as follows: --Direct-to-consumer sales increased 22% to $374 million from $307 million last year. U.S. comparable store sales for the quarter rose 21.1%, with retail stores up 11.7% and factory store sales up 34.0%. The exceptional U.S. factory store performance this quarter continued to reflect channel strength and the success of an improved merchandise offering. In Japan, sales rose 23% on a constant-currency basis, while dollar sales rose only 10% due to a weaker yen. Coach achieved high-single-digit increases in comparable location sales in Japan. --Indirect sales rose 14% to $124 million from $109 million in the same period last year. Strong international wholesale shipments and business-to-business sales contributed to these results. In the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , comparable department store POS (1) See point of sale and packet over SONET. (2) "Parent over shoulder." See digispeak. POS - point of sale sales rose over 20% 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 16 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 extremely pleased with the 23% growth in sales in constant currency in Japan this quarter, as we continue to grow our market share rapidly in this important market for Coach. 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 2006, the company opened three U.S. retail stores - all in new markets for Coach - and one factory store. The company also closed one factory store, bringing the total to 206 retail stores and 84 factory stores at April 1, 2006. In Japan, Coach opened three net new retail locations and expanded two locations as well. Mr. Frankfort continued, "Across all businesses, handbags and women's accessories continued to drive our business results, as the look of our 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. continues to evolve to reflect changing consumer preferences. Early in the quarter we saw excellent response to gallery satchels and an updated Hamptons collection. In February, fresh interpretations of Soho and our Hamptons Signature Striped striped adj. Having lines or bands of different color or texture. Adj. 1. striped - marked or decorated with stripes stripy patterned - having patterns (especially colorful patterns) carryalls sold exceptionally well, as did the new shoulder tote, a key item for the season. After Valentine's Day Valentine's Day: see Saint Valentine's Day. Valentine's Day Lovers' holiday celebrated on February 14, the feast day of St. Valentine, one of two 3rd-century Roman martyrs of the same name. St. , the Hamptons Weekend collection, including a new and distinctive patchwork design, became an instant success. We were also particularly pleased with the performance of our Limited Edition offerings, including the Hamptons Vintage carryall at $598 and the new Legacy shoulder tote at $798." "Our business this April has continued strong. As always, we have a pipeline of new, innovative and relevant products planned. This month we successfully launched our Soho Optic Signature assortment in a seasonal palette (1) In computer graphics, a range of colors used for display and printing. See color palette. (2) A collection of on-screen painting tools. (3) A toolbar that contains a set of functions for any kind of application. palette - colour palette in several favorite handbag styles, as well as in 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). , scarves scarves n. A plural of scarf1. scarves Noun a plural of scarf1 and hats. Additionally, straw straw, dried stalks of threshed grains, especially wheat, barley, oats, and rye. It has been used from antiquity for bedding, covering floors, and thatching roofs, as fodder and litter for animals, and in weaving such articles as mats, screens, baskets, ornaments and 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. and hobos in our important Legacy silhouettes were introduced. For Mother's Day, we're offering our soft totes in classic Signature and a new seasonal Signature in gradient gradient In mathematics, a differential operator applied to a three-dimensional vector-valued function to yield a vector whose three components are the partial derivatives of the function with respect to its three variables. The symbol for gradient is ∇. hues. Coming in June will be the new Patchwork and Signature Tie Dye groups, both perennial favorites Track listing
Mr. Frankfort concluded, "By the end of this fiscal year we will have opened about 55 new locations globally, bringing our total to about 525. During fiscal 2007, we are planning to accelerate our new unit openings to at least 85 Coach U.S. stores and international locations globally, bringing our total number of locations to over 600 by year end. Looking ahead, we have a clearly articulated ar·tic·u·la·ted adj. Characterized by or having articulations; jointed. roadmap focused on achieving continued rapid growth through our planning horizon Planning horizon The length of time a model or investor or plan projects into the future. ." The company now estimates 2006 sales of about $2.1 billion for the full fiscal year ending July 1, 2006, an increase of about 23% from the prior year, and earnings per share of $1.25 or up 36% from last year, compared with analysts' current consensus estimate of $1.24. This reflects sales of at least $500 million and earnings per share of $0.28 for the fourth quarter, up 22% from the $0.23 reported for the fourth quarter in fiscal 2005. It should be noted that last year's fourth quarter included a $7 million tax benefit for FY05, all recorded in the period. Excluding this benefit from the year-ago quarter, earnings per share are expected to rise 32%. For fiscal 2007, Coach projects sales growth of about 19% to about $2.5 billion and earnings per share growth of about 20% to $1.50, compared with the analysts' current consensus estimate of $1.48. The company also announced that it repurchased and retired 499,500 shares of common stock at an average cost of $36.64 during the third fiscal quarter, bringing the year-to-date total to 3,463,700 shares of common stock repurchased Stock repurchase A firm's repurchase of outstanding shares of its common stock. at an average cost of $32.85. At this time, approximately $136 million remains available for future repurchases under the company's 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. program, which expires in May 2007. Coach will host a conference call to review these results at 8:30 a.m. (EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT ) today, April 25, 2006. 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 Investor relations The process by which the corporation communicates with its investors. & Corporate Communications Corporate communications is the process of facilitating information and knowledge exchanges with internal and key external groups and individuals that have a direct relationship with an enterprise. . 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 and related accessories. Coach is sold worldwide through Coach stores, select 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. 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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Quarters and Nine Months Ended April 1, 2006 and April 2, 2005
(in thousands, except per share data)
(unaudited)
QUARTER ENDED NINE MONTHS ENDED
--------------------- -----------------------
April 1, April 2, April 1, April 2,
2006 2005 2006 2005
---------- ---------- ----------- -----------
Net sales $ 497,859 $ 415,939 $1,597,146 $1,291,763
Cost of sales 108,090 91,266 361,340 305,948
---------- ---------- ----------- -----------
Gross profit 389,769 324,673 1,235,806 985,815
Selling, general and
administrative expenses 224,333 192,337 651,319 541,432
---------- ---------- ----------- -----------
Operating income 165,436 132,336 584,487 444,383
Interest income, net 10,118 4,945 22,995 10,924
---------- ---------- ----------- -----------
Income before income
taxes and minority
interest 175,554 137,281 607,482 455,307
Income taxes 66,708 52,168 230,847 173,017
Minority interest, net
of tax - 4,241 - 13,534
---------- ---------- ----------- -----------
Net income $ 108,846 $ 80,872 $ 376,635 $ 268,756
========== ========== =========== ===========
Net income per share
Basic $ 0.28 $ 0.21 $ 0.99 $ 0.71
========== ========== =========== ===========
Diluted $ 0.28 $ 0.21 $ 0.96 $ 0.69
========== ========== =========== ===========
Shares used in computing
net income per share
Basic 383,739 379,695 381,330 378,885
========== ========== =========== ===========
Diluted 391,453 391,609 390,637 390,413
========== ========== =========== ===========
----------------------------------------------------------------------
Supplemental information
Net income, as reported $ 108,846 $ 80,872 $ 376,635 $ 268,756
Add back Stock Option
Expense
(after tax) 11,421 8,367 26,819 22,331
Net income, ex Stock
Option Expense $ 120,267 $ 89,239 $ 403,454 $ 291,087
Pro forma as adjusted
basic net income,
ex stock option expense,
per share $ 0.31 $ 0.24 $ 1.06 $ 0.77
Pro forma as adjusted
diluted net income,
ex stock option expense,
per share $ 0.31 $ 0.23 $ 1.03 $ 0.75
----------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
At April 1, 2006, July 2, 2005 and April 2, 2005
(in thousands)
(unaudited)
April 1, July 2, April 2,
2006 2005 2005
------------ ------------ ------------
ASSETS
Cash, cash equivalents and
short term investments $ 838,357 $ 383,051 $ 495,691
Receivables 110,415 65,399 83,630
Inventories 210,465 184,419 180,814
Other current assets 118,652 76,491 78,315
------------ ------------ ------------
Total current assets 1,277,889 709,360 838,450
Property and equipment, net 269,562 203,862 189,775
Long term investments - 122,065 198,591
Other noncurrent assets 326,979 334,870 72,232
------------ ------------ ------------
Total assets $ 1,874,430 $ 1,370,157 $ 1,299,048
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 54,841 $ 64,985 $ 49,964
Accrued liabilities 239,300 188,234 170,222
Subsidiary credit facilities 1,836 12,292 21,315
Current portion of long-term
debt 170 150 150
------------ ------------ ------------
Total current liabilities 296,147 265,661 241,651
Long-term debt 3,100 3,270 3,270
Other liabilities 60,337 45,306 65,080
Minority interest, net of tax - - 53,732
Stockholders' equity 1,514,846 1,055,920 935,315
------------ ------------ ------------
Total liabilities and
stockholders' equity $ 1,874,430 $ 1,370,157 $ 1,299,048
============ ============ ============
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