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Coach benefits from well received launch of Poppy

22 Oct '09
5 min read

Coach, Inc. a leading marketer of modern classic American accessories, today reported sales of $761 million for its first fiscal quarter ended September 26, 2009, compared with $753 million reported in the same period of the prior year, an increase of 1%. Net income for the quarter totaled $141 million, with earnings per diluted share of $0.44. This compared to net income of $146 million and earnings per diluted share of $0.44 in the prior year's first quarter.

Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc., said, “We experienced sequential improvement in our North American retail business this quarter, as the initiatives put into place earlier this year proved successful. Specifically, Coach benefited from the well received launch of the Poppy collection and other products at particularly compelling prices. We achieved a solid quarterly top-line performance; with North American stores generating an 8% overall gain on a 1% decline in comparable store sales. At the same time, we were very pleased to achieve earnings per share that matched the prior year with excellent operating margins.”

For the quarter, operating income totaled $223 million, 4% below the $233 million reported in the comparable year-ago period, while operating margin was 29.3% versus 31.0% reported for the prior year. During the quarter, gross profit declined 1% to $550 million from $558 million a year ago. Gross margin was 72.3% versus 74.2% a year ago, impacted as expected by both the continued promotional environment and channel mix. SG&A expenses as a percentage of net sales totaled 42.9%, as compared to 43.1% reported in the year-ago quarter.

First fiscal quarter sales results in each of Coach's primary channels of distribution were as follows:
Direct-to-consumer sales, which now include our China business, increased 10% to $654 million from $592 million last year. North American comparable store sales for the quarter declined 1.1%. In Japan, sales declined 3% on a constant-currency basis, while dollar sales rose 11%, adjusted for a stronger yen. China results continued very strong, with comparable store sales rising at a double-digit rate.

Indirect sales decreased 33% to $108 million in the first quarter from the $160 million reported for the prior year on a comparable basis. This decline was primarily due to reduced shipments into U.S. department stores, as the company continues to tightly manage inventories in that channel given softer sales at POS than last year. International POS sales posted gains in the period, driven by distribution and comparable location sales gains.

During the first quarter of fiscal 2010 in North America the company opened 10 retail stores – including eight in new markets for Coach - and five factory stores, bringing the total to 340 retail stores and 116 factory stores as of September 26, 2009. In Japan, Coach opened two locations, taking the total to 162 at the end of thequarter. In China, 5 net new locations were opened during the quarter, taking the total to 33.

Coach Inc

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