Coach Reports Second Quarter Earnings Per Share of $1.23

  Coach Reports Second Quarter Earnings Per Share of $1.23

Business Wire

NEW YORK -- January 23, 2013

Coach, Inc. (NYSE: COH, SEHK: 6388), a leading marketer of modern classic
American accessories, today announced sales of $1.50 billion for its second
fiscal quarter ended December 29, 2012, compared with $1.45 billion reported
in the same period of the prior year, an increase of 4%. On a constant
currency basis sales rose 5% for the quarter. Net income for the period
totaled $353 million, with earnings per diluted share of $1.23. This compared
to net income of $347 million and earnings per diluted share of $1.18 in the
prior year’s second quarter, increases of 2% and 5%, respectively.

Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc. said,
“During the holiday quarter we drove modest growth and continued to gain
overall traction on our key strategies. We posted strong international
results, leveraged the Men’s opportunity globally and strengthened our digital
capabilities. However, we were disappointed by our performance in North
America, where the holiday season proved challenging. Most broadly, the
consumer was impacted by a muted macroeconomic environment, while in the
Women’s handbag category competition intensified and promotional activity
increased. Importantly, we maintained our pricing strategies despite the
retail climate, protecting our brand proposition.”

“Over the last decade we have built Coach into a leading international
accessories company with a loyal and highly engaged consumer franchise. Our
customers recognize the Coach brand for its authenticity, innovation and
relevance. We’re now transforming Coach into a global lifestyle brand,
anchored in accessories. We’ve been strengthening our teams to enhance and
build out the Coach experience through product, retail environments and
integrated marketing communications. This comprehensive approach will continue
to add excitement and cachet to the brand.”

For the second fiscal quarter, operating income totaled $527 million, up 5%
from the $501 million reported on a GAAP basis in the comparable year ago
period, while the operating margin was 35.0% versus 34.6% reported in the
prior year. During the quarter, gross profit increased 4% to $1.09 billion
from $1.05 billion a year ago. Gross margin remained strong at 72.2%, even
with the prior year. SG&A expenses as a percentage of net sales was 37.2%,
compared to the 37.6% reported in the year-ago quarter.

During the year-ago quarter, the company recorded certain items which yielded
a substantially lower tax rate decreasing Coach’s provision for taxes. As a
result, it made charitable contributions which precisely offset the benefit of
the tax settlement to net income and earnings per share. Therefore, on a
non-GAAP basis, excluding these items, operating income for the prior year’s
second quarter was $521 million with a 36.0% operating margin and the SG&A
expense ratio was 36.2%. The increase in the SG&A expense ratio compared to
prior year on a non-GAAP basis reflected the acquisition of retail businesses
in Asia.

The company also announced that during the second fiscal quarter, it
repurchased and retired nearly four million shares of its common stock at an
average cost of $56.63, spending a total of $225 million and taking the
year-to-date total to $400 million. At the end of the period, approximately
$1.4 billion remained under the company’s current repurchase authorization.

For the six months ended December 29, 2012, net sales were $2.67 billion, up
7% from the $2.50 billion reported in the first six months of fiscal 2012. Net
income totaled $574 million, up 2% from the $562 million reported a year ago,
while earnings per share rose 5% to $2.00 from $1.90.

Second fiscal quarter sales results in each of Coach’s primary channels of
distribution were as follows:

  *Total North American sales increased 1%, to $1.08 billion from $1.07
    billion last year. North American direct sales rose 2% for the quarter
    with comparable store sales down 2%. At POS, sales in North American
    department stores were modestly below prior year while shipments into this
    channel declined.
  *International sales increased 12% to $411 million from $368 million last
    year.  China results continued very strong, with total sales growing 40%
    and comparable store sales rising at a double-digit rate. Shipments into
    international wholesale accounts declined modestly, while underlying POS
    sales trends remained robust. In Japan, sales declined 2% on a
    constant-currency basis, while dollar sales were 7% below the prior year,
    reflecting the weaker yen.

During the second quarter of fiscal 2013, in North America, the company opened
two retail locations - including the first company operated concession in
Macy’s Herald Square – as well as 15 factory stores including four Men’s
factory stores. This brought the total to 356 retail stores and 189 factory
stores as of December 29, 2012. In China, 13  new locations were opened during
the quarter, all on the mainland, bringing the total to 117. In Japan, Coach
opened five net locations taking the total to 193 at the end of the quarter.
In addition, at quarter-end, the company operated seven locations in
Singapore, 27 in Taiwan, 10 in Malaysia and 48 in Korea.

Mr. Frankfort continued, “Our international growth remained robust, led by
China, which is on course to generate at least $400 million in sales this
year. In addition, we’re pleased with the growth of our Men’s business, which
is on track to  generate sales of over $600 million globally in FY13, up about
50%.”

“Looking ahead, we’re confident in our ability to address the near-term
challenges in North America while leveraging the global opportunity, as we
continue to evolve the Coach brand,” Mr. Frankfort concluded.

Coach will host a conference call to review second fiscal quarter results at
8:30 a.m. (ET) today, January 23, 2013. 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 & Corporate Communications. 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 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, 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,"
"intend," “ahead,” "estimate," "on track," “on course,” "are positioned to,"
"continue," "project," "guidance," “target,” "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 for a complete list of risk factors.

                                                                    
COACH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Quarters and Six Months Ended December 29, 2012 and December 31, 2011
(in thousands, except per share data)
(unaudited)
                                                                                 
                     QUARTER ENDED                           SIX MONTHS ENDED
                     December 29,        December 31,        December 29,        December 31,
                     2012                2011                2012                2011
                                                                                 
Net sales            $ 1,503,774         $ 1,448,649         $ 2,665,124         $ 2,499,008
                                                                                 
Cost of sales         418,392           403,438           734,574           689,144   
                                                                                 
Gross profit           1,085,382           1,045,211           1,930,550           1,809,864
                                                                                 
Selling,
general and
administrative        558,805           544,310           1,072,256         986,997   
expenses
                                                                                 
Operating              526,577             500,901             858,294             822,867
income
                                                                                 
Interest
income                 266                 (16       )         302                 98
(expense), net
                                                                                 
Other expense         (1,505    )        (1,755    )        (3,577    )        (3,231    )
                                                                                 
Income before
provision for          525,338             499,130             855,019             819,734
income taxes
                                                                                 
Provision for         172,574           151,635           280,874           257,256   
income taxes
                                                                                 
Net income           $ 352,764          $ 347,495          $ 574,145          $ 562,478   
                                                                                 
Net income per
share
                                                                                 
Basic                $ 1.25             $ 1.20             $ 2.02             $ 1.94      
                                                                                 
Diluted              $ 1.23             $ 1.18             $ 2.00             $ 1.90      
                                                                                 
Shares used in
computing
net income per
share
                                                                                 
Basic                 282,693           289,812           283,630           289,578   
                                                                                 
Diluted               286,223           295,509           287,358           295,572   
                                                                                 

                                                                    
COACH, INC.
GAAP TO NON-GAAP RECONCILIATION
For the Quarters Ended December 29, 2012 and December 31, 2011
(in thousands, except per share data)
(unaudited)
                                                                              
                 QUARTER ENDED
                 December      December 31, 2011
                 29, 2012
                 GAAP          GAAP          Tax             Charitable       Non-GAAP
                 Basis         Basis                                          Basis
                 (As           (As           Adjustment      Contribution     (Excluding
                 Reported)     Reported)                                      Items)
                                                                              
Selling,
general and
administrative   $ 558,805     $ 544,310     $ -             $  20,270        $  524,040
expenses
                                                                              
Operating        $ 526,577     $ 500,901     $ -             $  (20,270 )     $  521,171
income
                                                                              
Income before
provision for    $ 525,338     $ 499,130     $ -             $  (20,270 )     $  519,400
income taxes
                                                                              
Provision for    $ 172,574     $ 151,635     $ (12,365 )     $  (7,905  )     $  171,905
income taxes
                                                                              
Net income       $ 352,764     $ 347,495     $ 12,365        $  (12,365 )     $  347,495
                                                                              
Diluted Net
income per       $ 1.23        $ 1.18        $ 0.04          $  (0.04   )     $  1.18
share
                                                                              

                                                                      
COACH, INC.
GAAP TO NON-GAAP RECONCILIATION
For the Six Months Ended December 29, 2012 and December 31, 2011
(in thousands, except per share data)
(unaudited)
                                                                                
                 SIX MONTHS ENDED
                 December        December 31, 2011
                 29, 2012
                 GAAP Basis      GAAP          Tax             Charitable       Non-GAAP
                                 Basis                                          Basis
                 (As             (As           Adjustment      Contribution     (Excluding
                 Reported)       Reported)                                      Items)
                                                                                
Selling,
general and
administrative   $ 1,072,256     $ 986,997     $ -             $  20,270        $  966,727
expenses
                                                                                
Operating        $ 858,294       $ 822,867     $ -             $  (20,270 )     $  843,137
income
                                                                                
Income before
provision for    $ 855,019       $ 819,734     $ -             $  (20,270 )     $  840,004
income taxes
                                                                                
Provision for    $ 280,874       $ 257,256     $ (12,365 )     $  (7,905  )     $  277,526
income taxes
                                                                                
Net income       $ 574,145       $ 562,478     $ 12,365        $  (12,365 )     $  562,478
                                                                                
Diluted Net
income per       $ 2.00          $ 1.90        $ 0.04          $  (0.04   )     $  1.90
share
                                                                                

                                                        
COACH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
At December 29, 2012, June 30, 2012 and December 31, 2011
(in thousands)
(unaudited)
                                                                  
                         December 29,       June 30,              December 31,
                         2012               2012                  2011
ASSETS
                                                                  
Cash, cash
equivalents and          $  858,657         $   917,215         $  1,085,595
short term
investments
Receivables                 223,041               174,462            212,041
Inventories                 493,659               504,490            429,031
Other current              273,010            208,361           169,339
assets
                                                                  
Total current               1,848,367             1,804,528          1,896,006
assets
                                                                  
Property and                701,273               644,449            595,829
equipment, net
Other noncurrent           729,789            655,344           609,050
assets
                                                                  
Total assets             $  3,279,429       $   3,104,321       $  3,100,885
                                                                  
LIABILITIES AND
STOCKHOLDERS'
EQUITY
                                                                  
Accounts payable         $  152,571         $     155,387         $  136,731
Accrued                     594,140               540,398            673,461
liabilities
Current portion of         22,225             22,375            804
long-term debt
                                                                  
Total current               768,936               718,160            810,996
liabilities
                                                                  
Long-term debt              485                   985                23,165
Other liabilities           427,676               392,245            397,998
                                                                  
Stockholders'              2,082,332          1,992,931         1,868,726
equity
                                                                  
Total liabilities
and stockholders'        $  3,279,429       $   3,104,321       $  3,100,885
equity
                                                                  

Contact:

Coach
Analysts & Media:
Andrea Shaw Resnick, 212-629-2618
SVP Investor Relations & Corporate Communications
 
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