Coach Reports Third Quarter Earnings of $0.84, up 10% on a 7% Sales Increase

  Coach Reports Third Quarter Earnings of $0.84, up 10% on a 7% Sales Increase

                  Increases Annual Dividend by 13% to $1.35

   Announces Planned Departure of Executive Creative Director, Reed Krakoff

Business Wire

NEW YORK -- April 23, 2013

Coach, Inc. (NYSE: COH, SEHK: 6388), a leading marketer of modern classic
American accessories, today announced sales of $1.19 billion for its third
fiscal quarter ended March 30, 2013, compared with $1.11 billion reported in
the same period of the prior year, an increase of 7%. On a constant currency
basis sales rose 10% for the quarter. Net income for the quarter totaled $239
million, with earnings per diluted share of $0.84. This compared to net income
of $225 million and earnings per diluted share of $0.77, in the prior year’s
third quarter, increases of 6% and 10%, respectively.

The company also announced that its Board of Directors has voted to increase
its cash dividend by $0.15 annually, raising it to an annual rate of $1.35 per
share starting with the dividend to be paid to stockholders in July 2013.

Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc., said,
“We’re pleased with the solid results we achieved in the third quarter as well
as the progress we’re making towards our transformation to a global lifestyle
brand, anchored in accessories. Our results demonstrate the brand’s strength
across channels, categories and geographies, and reflect the traction we’re
achieving in Men’s and digital, two key initiatives. Further, the announcement
today of an increase in our dividend reflects our commitment to return capital
to shareholders balanced with our investment in the business.”

For the third fiscal quarter, operating income totaled $348 million, up 3%
from the $337 million reported in the comparable year ago period, while the
operating margin was 29.3% versus 30.4% reported in the prior year. During the
quarter, gross profit increased 8% to $880 million, from $818 million a year
ago. Gross margin expanded 35 basis points on a year-over-year basis to 74.1%
from 73.8%. SG&A expenses as a percentage of net sales was 44.8%, compared to
the 43.3% reported in the year-ago quarter. The increase in the SG&A expense
ratio compared to prior year reflected the acquisition of retail businesses in
Asia.

For the nine months ended March 30, 2013, net sales were $3.85 billion, up 7%
from the $3.61 billion reported in the first nine months of fiscal 2012. On a
constant currency basis sales rose 8% for the period. Net income totaled $813 
million, up 3% from the $787 million reported a year ago, while earnings per
share rose 6% to $2.84 from $2.67.

Third fiscal quarter sales results in each of Coach’s primary segments were as
follows:

  *Total North American sales increased 7% to $792 million from $738 million
    last year. North American direct sales rose 8% for the quarter with
    comparable store sales up 1%. At POS, sales in North American department
    stores were slightly above prior year while shipments into this channel
    rose slightly as well.
  *International sales increased 6% to $382 million from $359 million last
    year. On a constant currency basis sales rose 14% for the quarter. 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 fell slightly, while underlying POS sales trends
    remained robust. In Japan, sales were even to prior year on a
    constant-currency basis, while dollar sales declined 14%, reflecting the
    weaker yen.

During the third quarter of fiscal 2013, in North America, the company opened
one retail store, closed five others and opened two Men’s factory stores. This
brought the total to 352 retail stores and 191 factory stores as of March 30,
2013. In China, the 100th location on the Mainland was opened during the
quarter, bringing the total to 118. In Japan, Coach closed two locations
taking the total to 191 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 49 in Korea.

Mr. Victor Luis, President and Chief Commercial Officer of Coach, Inc., added,
“While we’re in the early stages of our brand transformation, we’re pleased
with our progress. As announced during the quarter, we made a number of key
creative hires, taking additional steps to broaden our capabilities to enhance
the Coach experience through product, retail environments and integrated
marketing communications. Furthermore, our new footwear assortment, which
launched during March in over 170 stores in North America and 60
directly-operated stores internationally, has been very well received by our
consumers.

“Internationally, our business is growing rapidly, with China in particular
continuing to post excellent gains, and is now on course to generate about
$425 million in sales this year. We’re also pleased to announce that we’ve
reached an agreement to purchase our partner’s 50% interest in our businesses
in the United Kingdom and Europe, with the transaction expected to close in
July. We believe the region has significant long term potential, attracting
both domestic shoppers and the international tourist.

“We’re delighted with the results we’re achieving globally in our Men’s
business, which remains on track to double to over $600 million this year, up
about 50%. Given the success of Men’s, we now have a broader Men’s offering in
over 600 locations globally and across all channels.

“Our solid results this quarter underscore the confidence we have in our
ability to leverage the global opportunity, as we continue to evolve the Coach
brand,” Mr. Luis concluded.

Separately, Reed Krakoff, President and Executive Creative Director of Coach,
Inc., has informed the company of his decision not to renew his contract,
which expires in June 2014, to focus exclusively on his namesake brand. Coach
is exploring strategic options for the Reed Krakoff brand, which may involve a
sale to a group in which Mr. Krakoff would participate. In addition, the
company has commenced a search for his successor.

Lew Frankfort commented, “Reed Krakoff has served as President and Executive
Creative Director of Coach for over 16 years. His contribution in evolving
Coach from a house of American leather goods to a leading international
accessories brand is immeasurable and we have great admiration and respect for
Reed’s significant accomplishments. We’re looking forward to the next chapter
of our growth story, now underway, driven by the exceptional senior creative
team Reed and I have forged, as we transform Coach.”

“I am grateful to Lew Frankfort and to the members of the Board for the
support and the amazing opportunities I have been given. I have every
confidence in the Coach creative team and thank them for their dedication. I
am extremely excited to be focusing exclusively on the Reed Krakoff brand,
which has developed into a recognized luxury fashion and accessory company,”
said Mr. Krakoff.

Coach will host a conference call to review third fiscal quarter results at
8:30 a.m. (EDT) today, April 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," “plan,” "should,"
“believe,” “next,” “develop,” "expect," “confidence,” “trends,” "intend,"
"estimate," "on track," "are positioned to," “on course,” “opportunity,”
"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 Nine Months Ended March 30, 2013 and March 31, 2012
(in thousands, except per share data)
(unaudited)
                                                                                           
                     QUARTER ENDED                         NINE MONTHS ENDED
                     March 30,         March 31,           March 30,         March 31,
                     2013              2012                2013              2012
                                                                                           
Net sales            $ 1,187,578       $ 1,108,981         $ 3,852,702       $ 3,607,989
                                                                                           
Cost of sales         307,390         290,914           1,041,964       980,058   
                                                                                           
Gross profit           880,188           818,067             2,810,738         2,627,931
                                                                                           
Selling,
general and
administrative        531,695         480,575           1,603,951       1,467,572 
expenses
                                                                                           
Operating              348,493           337,492             1,206,787         1,160,359
income
                                                                                           
Interest
income                 1,021             257                 1,323             355
(expense), net
                                                                                           
Other expense         (1,764    )      (1,929    )        (5,341    )      (5,160    )
                                                                                           
Income before
provision for          347,750           335,820             1,202,769         1,155,554
income taxes
                                                                                           
Provision for         108,818         110,818           389,692         368,074   
income taxes
                                                                                           
Net income           $ 238,932        $ 225,002          $ 813,077        $ 787,480   
                                                                                           
Net income per
share
                                                                                           
Basic                $ 0.85           $ 0.78             $ 2.88           $ 2.73      
                                                                                           
Diluted              $ 0.84           $ 0.77             $ 2.84           $ 2.67      
                                                                                           
Shares used in
computing
net income per
share
                                                                                           
Basic                 280,818         287,569           282,805         288,981   
                                                                                           
Diluted               284,624         293,496           286,559         294,952   

                                                                         
                                                                                                
COACH, INC.
GAAP TO NON-GAAP RECONCILIATION
For the Nine Months Ended March 30, 2013 and March 31, 2012
(in thousands, except per share data)
(unaudited)
                                                                                                
                   NINE MONTHS ENDED
                   March 30,       March 31, 2012
                   2013
                   GAAP Basis      GAAP Basis      Tax             Charitable       Non-GAAP
                                                                                    Basis
                   (As             (As             Adjustment      Contribution     (Excluding
                   Reported)       Reported)                                        Items)
                                                                                                
Selling,
general and
administrative     $ 1,603,951     $ 1,467,572     $ -           $  20,270        $ 1,447,302
expenses
                                                                                                
Operating          $ 1,206,787     $ 1,160,359     $ -           $  (20,270 )     $ 1,180,629
income
                                                                                                
Income before
provision for      $ 1,202,769     $ 1,155,554     $ -           $  (20,270 )     $ 1,175,824
income taxes
                                                                                                
Provision for      $ 389,692       $ 368,074       $ (12,365 )     $  (7,905  )     $ 388,344
income taxes
                                                                                                
Net income         $ 813,077       $ 787,480       $ 12,365        $  (12,365 )     $ 787,480
                                                                                                
Diluted Net
income per         $ 2.84          $ 2.67          $ 0.04          $  (0.04   )     $ 2.67
share

                                                         
                                                                             
COACH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
At March 30, 2013, June 30, 2012 and March 31, 2012
(in thousands)
(unaudited)
                                                                             
                                 March 30,       June 30,        March 31,
                                 2013            2012            2012
ASSETS
                                                                             
Cash, cash equivalents and       $ 928,495       $ 917,215       $ 929,670
short term investments
Receivables                        177,139         174,462         169,467
Inventories                        515,915         504,490         475,364
Other current assets              272,642        208,361        185,047
                                                                             
Total current assets               1,894,191       1,804,528       1,759,548
                                                                             
Property and equipment,            686,597         644,449         602,685
net
Other noncurrent assets           691,332        655,344        622,637
                                                                             
Total assets                     $ 3,272,120     $ 3,104,321     $ 2,984,870
                                                                             
LIABILITIES AND
STOCKHOLDERS' EQUITY
                                                                             
Accounts payable                 $ 137,143       $ 155,387       $ 107,394
Accrued liabilities                455,248         540,398         514,992
Current portion of                22,122         22,375         847
long-term debt
                                                                             
Total current liabilities          614,513         718,160         623,233
                                                                             
Long-term debt                     485             985             22,607
Other liabilities                  413,157         392,245         400,128
                                                                             
Stockholders' equity              2,243,965      1,992,931      1,938,902
                                                                             
Total liabilities and            $ 3,272,120     $ 3,104,321     $ 2,984,870
stockholders' equity
                                                                             

Contact:

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