Coach Reports Third Quarter Earnings Per Share of $0.30; up 76% and Ahead of Expectations; Raises Guidance for FY04; Results Driven by a 42% Sales Gain and Continued Margin Expansion.Business Editors NEW YORK--(BUSINESS WIRE)--April 20, 2004 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 76% 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 $0.30 for its third fiscal quarter ended March 27, 2004. This substantial increase in earnings from the prior year's third quarter reflected a 42% 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 third quarter, net sales were $313.1 million, 42% higher than the $220.4 million reported in the same period of the prior year. Net income rose 83% to $58.3 million from $31.9 million a year ago, and earnings per share increased 76% to $0.30 compared with $0.17 the prior year. These results were ahead of the analysts' recently revised consensus estimate of $0.27 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 outstanding third quarter sales reflect sustained momentum and market share gains in all channels of our business. These results again demonstrate the vitality vi·tal·i·ty n. 1. The capacity to live, grow, or develop. 2. Physical or intellectual vigor; energy. of Coach and speak to our unique proposition as America's leading accessible luxury accessories brand. Consumers continue to embrace our distinctive and stylish Stylish is a free Mozilla extension that allows for the manipulation of web pages and XUL application user interfaces through the use of CSS or user styles available localy or from centralized web-site [1], which allows style sharing. products, which are well-made Adj. 1. well-made - skillfully constructed superior - of high or superior quality or performance; "superior wisdom derived from experience"; "superior math students" and offer excellent value. Further, our growth in profitability evidences our ability to drive continued margin improvement and leverage our expense base." During the quarter, gross profit rose 49% to $ 237.5 million from $159.8 million a year ago. Gross margin expanded by 340 basis points from 72.5% to 75.9%, driven by channel mix, sourcing cost initiatives and product mix. SG&A expenses as a percentage of net sales declined to 43.6%, a 500 basis point decrease from the 48.6% reported in the year-ago quarter, primarily due to leveraging the higher sales. For the nine months ended March 27, 2004, net sales were $983.0 million, up 36% from the $721.7 million reported in the first nine months of fiscal 2003. Net income rose to $196.1 million, up 68% from the $116.8 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, which consist primarily of sales at U.S. Coach stores, increased 32% to $160.3 million from $121.6 million last year. Comparable store sales for the quarter rose 20.5%, with retail stores up 28.7% and factory store sales up 9.3%. -- Indirect sales rose 55% to $152.8 million from $98.8 million in the same period last year. All indirect businesses, including Coach Japan, U.S. 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. , international wholesale and special markets, contributed to this significant increase. Mr. Frankfort added, "Our exceptionally strong results this quarter are a continuation of the trend we have seen since we became a public company more than three years ago. Our business has been powered by consistently well-received new product flow, surging U.S. Coach store traffic and market share gains in Japan. Colorful spring offerings, driven by handbags and women's accessories, have drawn an enthusiastic response from consumers. We're we're Contraction of we are. we're we are particularly pleased with the performance of the Soho handbag collection across multiple fabrications and silhouettes, highlighted by the new flap The communications protocol used by AOL Instant Messenger (AIM). FLAP runs over TCP/IP and provides the header format for transmitting IM commands and data. It includes the SNAC data type, which is the primary data structure transmitted between clients and servers. See OSCAR. 1. hobo. In addition, we're also pleased with the continued strength of Hamptons - notably the updated carryalls, popular buckle demi and flap satchel. Last month, we also re-introduced Hamptons Weekend, a lightweight and functional group of sporty sport·y adj. sport·i·er, sport·i·est 1. Appropriate for sport or participation in sports. 2. Exhibiting sportsmanship; sporting. 3. Flashy; jazzy. 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. , which gives consumers a casual new option from Coach. "Our results in Japan were also very strong, as comparable locations again posted double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. sales gains, and our new shops exceeded our expectations. In addition, just last week, we received a terrific reception at the opening of our newest Japanese Japanese (jăp'ənēz`), language of uncertain origin that is spoken by more than 125 million people, most of whom live in Japan. There are also many speakers of Japanese in the Ryukyu Islands, Korea, Taiwan, parts of the United States, and flagship, located in the Marunouchi section of Tokyo. This 5,300 square foot store is our third flagship in Japan and is located in a recently re-developed area and hub for young Japanese working women." During the third quarter of fiscal 2004, the company opened two Coach retail stores, resulting in a total of 167 retail stores and 77 factory stores at March 27, 2004. Through Coach Japan, one location was added, bringing the total in Japan to 100. "We're well positioned to sustain accelerated growth through the rest of this quarter, as our momentum this month has continued throughout all channels of our business. As always we have a strong pipeline of fresh and innovative products planned. This month we re-launched our popular 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 basket totes, which will be our Mother's Day feature as well. These totes and a new top-handled style use a variety of materials in combination with straw, including patent leather trim and leather appliques. Also in April, our Optic Signature group in pink, blue and green premiered in three handbag styles, in addition to scarves scarves n. A plural of scarf1. scarves Noun a plural of scarf1 and hats. In May, our special edition Soft Cinched Tote returns with an all-store distribution in several colors in both Signature and leather fabrications. Also in the fourth quarter, we will be adding seven more retail stores in the U.S., bringing the total to 19 new retail stores in fiscal 2004." Mr. Frankfort concluded, "Looking ahead, we've never felt more positive about our prospects for growth, which rest on our distinctive proposition, strong brand equities, and expanding market share." The company now estimates 2004 sales of over $1.3 billion for the full fiscal year ending July 3, 2004, an increase of about 37% from prior year, and earnings per share of at least $1.32 or up 67% from last year, compared with analysts' current consensus estimate of $1.25. This reflects sales of at least $330 million and earnings per share of at least $0.30 for the fourth quarter, up 88% from the $0.16 reported for the same period in fiscal 2003 and above the analysts' consensus estimate of $0.26. For fiscal 2005, we expect sales growth of at least 19% to at least $1.55 billion, and earnings per share growth of at least 21% to least $1.60, compared with analysts' current consensus estimate of $1.51. 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 20, 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 1-888-455-0032 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 today, for a period of five business days. The number to call is 1-800-947-4869. 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, sunwear, 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 Nine Months Ended March 27,
2004 and March 29, 2003
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(in thousands, except per share data)
------------------------------------
(unaudited)
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QUARTER ENDED NINE MONTHS ENDED
------------------- -------------------
March 27, March 29, March 27, March 29,
2004 2003 2004 2003
-------- -------- -------- --------
Net sales $313,073 $220,396 $982,961 $721,710
Cost of sales 75,556 60,589 252,392 213,837
-------- -------- -------- --------
Gross profit 237,517 159,807 730,569 507,873
Selling, general and
administrative expenses 136,648 107,060 397,371 314,918
-------- -------- -------- --------
Operating income 100,869 52,747 333,198 192,955
Interest income, net (768) (344) (1,639) (619)
-------- -------- -------- --------
Income before income taxes
and minority interest 101,637 53,091 334,837 193,574
Income taxes 38,114 19,644 125,567 71,624
Minority interest, net of tax 5,212 1,594 13,192 5,186
-------- -------- -------- --------
Net income $ 58,311 $ 31,853 $196,078 $116,764
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Basic net income per share $ 0.31 $ 0.18 $ 1.06 $ 0.65
======== ======== ======== ========
Shares used in computing
basic net income per share 187,006 180,462 185,251 178,775
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Diluted net income per share $ 0.30 $ 0.17 $ 1.02 $ 0.63
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Shares used in computing
diluted net income per share 193,569 186,492 192,147 184,929
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COACH, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
At March 27, 2004, June 28, 2003 and March 29, 2003
---------------------------------------------------
(in thousands)
--------------
March 27, June 28, March 29,
2004 2003 2003
-------- -------- --------
(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $445,343 $229,176 $192,263
Receivables 78,657 35,470 46,703
Inventories 153,834 143,807 135,996
Other current assets 46,978 40,085 29,670
-------- -------- --------
Total current assets 724,812 448,538 404,632
Property and equipment, net 134,506 118,547 109,370
Other noncurrent assets 52,341 50,567 65,374
-------- -------- --------
Total assets $911,659 $617,652 $579,376
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 39,670 $ 26,637 $ 29,660
Accrued liabilities 141,129 108,273 112,345
Subsidiary credit facilities 13,264 26,471 32,945
Current portion of long-term debt 115 80 80
-------- -------- --------
Total current liabilities 194,178 161,461 175,030
Long-term debt 3,420 3,535 3,535
Other liabilities 5,086 3,572 3,448
Minority interest, net of tax 35,347 22,155 19,733
Stockholders' equity 673,628 426,929 377,630
-------- -------- --------
Total liabilities and stockholders'
equity $911,659 $617,652 $579,376
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