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Coach, Inc. (COH, SEHK: 6388), a leading marketer of modern
classic American accessories, today reported sales of $1.16 billion for
its fourth fiscal quarter ended June 30, 2012, compared with $1.03
billion reported in the same period of the prior year, an increase of
12%. Net income for the quarter totaled $251 million, with earnings per
diluted share of $0.86. This compared to net income of $202 million and
earnings per diluted share of $0.68, in the prior year’s fourth quarter,
increases of 24% and 27%, respectively.
For the fiscal year, net sales rose 15% to $4.76 billion from $4.16
billion the prior fiscal year while net income increased 18% to $1.04
billion from $881 million. In addition, diluted earnings per share rose
21% to $3.53 from $2.92.
Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc.,
said, "I’m pleased that we were able to once again achieve strong
double-digit sales and earnings gains for our fiscal fourth quarter and
full year. We made significant progress against our key initiatives -
aggressively growing our international business, becoming a market
leader in the Men’s accessories category and harnessing the power of the
digital world. In FY12, we accelerated the acquisition of key Asian
domestic distributors and grew our distribution rapidly in emerging
luxury markets such as China."
"During the fourth quarter our international sales remained robust,
driven by both distribution and productivity increases. In North
America, however, an increasingly promotional environment led to lower
growth than expected in factory stores. As a result, we responded by
reinstating our prior practice of in-store couponing in a cross section
of factory locations late in the period. It’s important to note that we
have significant pricing flexibility and a variety of marketing levers
available in this channel, which allow us to balance productivity gains
and margin improvement."
For the quarter, operating income totaled $371 million on a non-GAAP
basis, 19% above the $312 million reported in the year-ago period, while
operating margin was 32.1% versus 30.3%. During the quarter, gross
profit rose 13% to $838 million from $741 million reported a year ago,
while gross margin was 72.6% versus 71.8%. SG&A expenses, as a
percentage of net sales, totaled 40.5%, compared to the 41.5% reported
in the year-ago quarter. During the quarter, the company recorded
certain items including a favorable tax settlement. As a result, the
company made charitable contributions which precisely offset the benefit
of the tax settlement to net income and earnings per share. Therefore,
on a GAAP basis, operating income for the fourth quarter was $352
million with a 30.4% margin and the SG&A expense ratio was 42.1%.
For the full year, operating income totaled $1.55 billion on a non-GAAP
basis, 17% above the $1.33 billion reported in the year ago period, also
on a non-GAAP basis, while operating margin was 32.6% versus 32.0%.
During the year, gross profit rose 15% to $3.47 billion from $3.02
billion a year ago. Gross margin was 72.8% versus 72.7% a year ago. SG&A
expenses, as a percentage of net sales, totaled 40.2%, compared to the
40.7% reported in fiscal 2011. During both FY12 and FY11 the company
recorded certain items including favorable tax settlements. As a result,
and in both years, it made charitable contributions which precisely
offset the benefit of these tax settlements to net income and earnings
per share. Therefore, on a GAAP basis, operating income for the fiscal
year 2012 was $1.51 billion with a 31.7% margin and the SG&A expense
ratio was 41.0%. This compared to fiscal year 2011 operating income of
$1.30 billion on a GAAP basis, with an operating margin of 31.4% and an
SG&A expense ratio of 41.3%.
The company also announced that during the fourth fiscal quarter, it
repurchased and retired about 2.5 million shares of its common stock at
an average cost of $67.79, spending a total of $169 million. For the
full year, the company repurchased and retired about 10.7 million shares
at an average cost of $65.49, spending a total of $700 million. At the
end of the period, approximately $260 million remained under the
company’s present repurchase authorization.
Fourth fiscal quarter sales results in each of Coach’s primary channels
of distribution were as follows:
- Direct-to-consumer sales, which now include Singapore and Taiwan,
increased 13% to $1.05 billion in the fourth quarter from $924
million last year. North American same store sales for the quarter
rose 1.7% on a comparable basis. China results continued to be
exceptional with overall sales growth of 60% and same store sales
rising at a double-digit rate. Sales at Coach Japan increased 16%
versus prior year in constant currency and rose 18% in dollars.
For the full year, direct-to-consumer sales rose 16% to $4.23
billion from $3.65 billion generated in fiscal 2011. Overall, North
American same store sales for the fiscal year rose 6.6% on a
comparable basis. In China, sales exceeded $300 million and rose
over 60%, driven by both new store openings and double-digit
increases in same store sales. Fiscal 2012 sales at Coach Japan were
up 6% in constant currency and rose 12% in dollars.
- Indirect sales were even with prior year on a comparable basis at
$108 million in the fourth quarter driven by international wholesale
shipments while shipments into U.S. department stores declined. At
POS, international sales rose significantly - driven by both
distribution and same location sales gains - while U.S. department
store sales decreased moderately on a year-over-year basis in the
quarter.
For the full year, indirect sales rose 4% on a comparable basis to
$531 million from $512 million recorded for fiscal 2011. During the
fiscal year, both international sales at POS and shipments into this
channel rose compared to prior year levels, driven by both
distribution and same location sales. U.S. wholesale shipments and
POS sales at U.S. department stores both declined slightly.
During the fourth quarter of fiscal 2012, the company opened four net
new North American retail stores, while opening seven factory stores -
including five dedicated Men’s stores. This brought the total to 354
retail stores and 169 factory stores in North America as of June 30,
2012. In China, 11 net locations were opened, bringing the total to 96.
In Japan, Coach opened two Men’s retail locations and a factory store.
Therefore, at the end of the quarter there were 187 total locations in
Japan. As previously announced, during FY12 the company acquired the
domestic retail Coach businesses in Singapore and Taiwan. At year-end,
as a result of these acquisitions and two subsequent openings the
company operated seven locations in Singapore and 27 in Taiwan.
Mr. Frankfort continued, "We’re particularly excited about the
just-introduced, dual-gender Legacy lifestyle collection. Inspired by
our heritage, grounded in leather and featuring distinctive Coach
elements, it is our largest product launch in many years. It is being
supported by visual merchandising enhancements in our stores and a
comprehensive marketing plan including digital, print and outdoor. This
iconic collection provides a new foundation for the brand, targeting
multi-generational consumers whom are both classic and stylish in their
preferences."
"As we look forward to FY13, we are mindful of balancing the impact of
the muted consumer environment in North America and a softening global
macroeconomic outlook with our optimism around the launch of Legacy,
Men’s and the strong international expansion opportunities for Coach.
Additionally, FY13 will be an investment year, as we amplify our actions
to drive long-term growth. Most significant is our acceleration of the
acquisition of the domestic retail operations of key Asian distributors
- including those in Malaysia and Korea in the first quarter - and the
further development of the infrastructure to support our global growth.
In addition, we’re distorting investments in the digital space to
strengthen our capabilities and deepen our engagement with consumers. We
expect that together these investments will result in modest deleverage
in FY13."
"Our goals remain unchanged. We’re committed to achieving double-digit
top- and bottom-line growth over our planning horizon. We have a
business model that generates significant cash flow and we’re in a
position to invest in our brand while continuing to return capital to
shareholders," Mr. Frankfort concluded.
Coach will host a conference call to review these results at 8:30 a.m.
(EDT) today, July 31, 2012. Interested parties may listen to the webcast
by accessing www.coach.com/investors
on the Internet or dialing into 1-888-405-2080 or 1-210-795-9977 and
asking for the Coach earnings call led by Andrea Shaw Resnick, SVP of
Investor Relations. 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 or 1-203-369-0080. 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, is a leading American marketer of
fine accessories and gifts for women and men, including handbags, men’s
bags, women’s and men’s small leathergoods, 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, and through
Coach’s website at www.coach.com.
Coach’s common stock is traded on the New York Stock Exchange under the
symbol COH and Coach’s Hong Kong Depositary Receipts are traded on The
Stock Exchange of Hong Kong Limited under the symbol 6388.
Neither the Hong Kong Depositary Receipts nor the Hong Kong
Depositary Shares evidenced thereby have been or will be registered
under the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered or sold in the United States or to, or for
the account of, a U.S. Person (within the meaning of Regulation S under
the Securities Act), absent registration or an applicable exemption from
the registration requirements. Hedging transactions involving these
securities may not be conducted unless in compliance with the Securities
Act.
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," "confidence," "trends," "intend," "estimate," "on track," "are
positioned to," "on course," "opportunity," "continue," "project,"
"guidance," "target," "forecast," "achieve," "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 and its Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 2011 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 and Years Ended June 30,
2012 and July 2, 2011
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(in thousands, except per share data)
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(unaudited)
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QUARTER ENDED YEAR ENDED
----------------------------------- -----------------------------------
June 30, July 2, June 30, July 2,
2012 2011 2012 2011
---------------- ---------------- ---------------- ----------------
Net sales $ 1,155,191 $ 1,031,675 $ 4,763,180 $ 4,158,507
Cost of sales 317,044 291,136 1,297,102 1,134,966
--------- --------- --------- ---------
Gross profit 838,147 740,539 3,466,078 3,023,541
Selling, general and
administrative expenses 486,517 428,447 1,954,089 1,718,617
--------- --------- --------- ---------
Operating income 351,630 312,092 1,511,989 1,304,924
Interest income, net 365 261 720 1,031
Other expense (1,886 ) (1,668 ) (7,046 ) (4,736 )
--------- -- --------- -- --------- -- --------- --
Income before provision for income taxes 350,109 310,685 1,505,663 1,301,219
Provision for income taxes 98,679 108,204 466,753 420,419
--------- --------- --------- ---------
Net Income $ 251,430 $ 202,481 $ 1,038,910 $ 880,800
== ========= == ========= == ========= == =========
Net income per share
Basic $ 0.88 $ 0.70 $ 3.60 $ 2.99
== ========= == ========= == ========= == =========
Diluted $ 0.86 $ 0.68 $ 3.53 $ 2.92
== ========= == ========= == ========= == =========
Shares used in computing
net income per share
Basic 286,311 291,163 288,284 294,877
========= ========= ========= =========
Diluted 291,778 298,722 294,129 301,558
========= ========= ========= =========
COACH, INC.
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GAAP TO NON-GAAP RECONCILIATION
--------------------------------------------------------------------------------------------------------------
For the Quarters Ended June 30, 2012 and
July 2, 2011
--------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
--------------------------------------------------------------------------------------------------------------
(unaudited)
--------------------------------------------------------------------------------------------------------------
QUARTER ENDED
----------------------------------------------------------------------------------------------
June 30, 2012 July 2, 2011
---------------------------------------------------------------------------- ---------------
GAAP Basis Tax Charitable Non-GAAP Basis GAAP Basis
(As Reported) Adjustment Contribution (Excluding Items) (As Reported)
--------------- ---------------- ------------------ ------------------ ---------------
Selling, general and
administrative expenses $ 486,517 $ - $ 18,939 $ 467,578 $ 428,447
Operating income $ 351,630 $ - $ (18,939 ) $ 370,569 $ 312,092
Income before provision for income taxes $ 350,109 $ - $ (18,939 ) $ 369,048 $ 310,685
Provision for income taxes $ 98,679 $ (11,553 ) $ (7,386 ) $ 117,618 $ 108,204
Net income $ 251,430 $ 11,553 $ (11,553 ) $ 251,430 $ 202,481
Diluted Net income per share $ 0.86 $ 0.04 $ (0.04 ) $ 0.86 $ 0.68
COACH, INC.
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GAAP TO NON-GAAP RECONCILIATION
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For the Years Ended June 30, 2012 and
July 2, 2011
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(in thousands, except per share data)
-------------------------------------------------------------------------------------------------------------------
(unaudited)
-------------------------------------------------------------------------------------------------------------------
YEARS ENDED
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June 30, 2012 July 2, 2011
------------------------------------------------------------------------------ -------------------
GAAP Basis Tax Charitable Non-GAAP Basis Non-GAAP Basis
(As Reported) Adjustment Contribution (Excluding Items) (Excluding Items)
----------------- ---------------- ------------------ ------------------ -------------------
Selling, general and
$ 1,954,089 $ - $ 39,209 $ 1,914,880 $ 1,692,939
administrative expenses
Operating income $ 1,511,989 $ - $ (39,209 ) $ 1,551,198 $ 1,330,602
Income before provision for income taxes $ 1,505,663 $ - $ (39,209 ) $ 1,544,872 $ 1,326,897
Provision for income taxes $ 466,753 $ (23,917 ) $ (15,292 ) $ 505,962 $ 446,097
Net income $ 1,038,910 $ 23,917 $ (23,917 ) $ 1,038,910 $ 880,800
Diluted Net income per share $ 3.53 $ 0.08 $ (0.08 ) $ 3.53 $ 2.92
YEAR ENDED
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July 2, 2011
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GAAP Basis Tax Japan Charitable Non-GAAP Basis
(As Reported) Adjustment Donation Contribution (Excluding Items)
----------------- ---------------- ------------------ ------------------ -------------------
Selling, general and
administrative expenses $ 1,718,617 $ - $ 4,809 $ 20,869 $ 1,692,939
Operating income $ 1,304,924 $ - $ (4,809 ) $ (20,869 ) $ 1,330,602
Income before provision for income taxes $ 1,301,219 $ - $ (4,809 ) $ (20,869 ) $ 1,326,897
Provision for income taxes $ 420,419 $ (15,517 ) $ (2,022 ) $ (8,139 ) $ 446,097
Net income $ 880,800 $ 15,517 $ (2,787 ) $ (12,730 ) $ 880,800
Diluted Net income per share $ 2.92 $ 0.05 $ (0.01 ) $ (0.04 ) $ 2.92
COACH, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------
At June 30, 2012 and July 2, 2011
--------------------------------------------------------------------------
(in thousands)
--------------------------------------------------------------------------
(unaudited)
--------------------------------------------------------------------------
June 30, July 2,
2012 2011
--------------- --------------
ASSETS
Cash, cash equivalents and short term investments $ 917,215 $ 702,038
Receivables 174,462 142,898
Inventories 504,490 421,831
Other current assets 208,361 185,621
--------- ---------
Total current assets 1,804,528 1,452,388
Property and equipment, net 644,449 582,348
Other noncurrent assets 655,344 600,380
--------- ---------
Total assets $ 3,104,321 $ 2,635,116
==== ========= === =========
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable $ 155,387 $ 118,612
Accrued liabilities 540,398 473,610
Current portion of long-term debt 22,375 795
--------- ---------
Total current liabilities 718,160 593,017
Long-term debt 985 23,360
Other liabilities 392,245 406,170
Stockholders’ equity 1,992,931 1,612,569
--------- ---------
Total liabilities and stockholders’ equity $ 3,104,321 $ 2,635,116
==== ========= === =========
SOURCE: Coach, Inc.
Coach
Analysts & Media:
Andrea Shaw Resnick, 212-629-2618
SVP Investor Relations and Corporate Communications
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