Coach reaffirms FY08 guidance at $2.06

April 23, 2008 - United States Of America

Coach Inc, a leading marketer of modern classic American accessories, announced an increase of 19% in earnings per diluted share to $0.46 for its third fiscal quarter ended March 29, 2008, up from $0.39 per diluted share a year ago. This substantial increase in earnings from the prior year’s third quarter reflected a 19% gain in net sales.

In the third quarter, net sales were $745 million compared with the $625 million reported in the same period of the prior year. Net income rose 10% to $162 million, or $0.46 per diluted share, compared with $147 million, or $0.39 per diluted share in the prior year.

For the quarter, operating income totaled $257 million, up 13% from the $227 million reported in the comparable year ago period, while operating margin was 34.5% versus 36.2% reported for the prior year. During the quarter, gross profit rose 15% to $558 million from $486 million a year ago.

Gross margin was 75.0% versus 77.8% a year ago, impacted primarily by the sharp rise of the yen over the period, and, as expected, by both the continued promotional environment and channel mix. SG&A expenses as a percentage of net sales improved by 100 basis points to 40.5%, compared to the 41.5% reported in the year-ago quarter, as the company was able to leverage expenses – notably selling and distribution costs - on the higher sales base.

On a constant-exchange-rate basis, excluding the positive currency effect from translating foreign-denominated sales in U.S. dollars, net sales increased 16% in the third quarter. On the same basis, operating income rose 17%.

Lew Frankfort, Chairman and Chief Executive Officer of Coach Inc, said, “We were pleased to deliver quarterly results which met our top and bottom-line expectations despite the weakening retail climate in the U.S. Our strong overall performance continues to reflect the critical balance provided by our multi-channel and international business model.”

For the nine months ended March 29, 2008, net sales were $2.4 billion, up 22% from the $2.0 billion reported in the first nine months of fiscal 2007. Net income rose to $570 million, up 19% from the $477 million reported a year ago, while earnings per share rose 23% to $1.56 from $1.27.

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

• Direct-to-consumer sales increased 20% to $578 million from $481 million last year, including a 20% gain in sales from new and existing Coach stores in North America. North American comparable store sales for the quarter rose 9.0%. This compares to last year’s third quarter in which North American comparable store sales rose 20.0% overall. In Japan, sales rose 12% on a constant-currency basis, while dollar sales rose 25% adjusted for a stronger yen.

• Indirect sales increased 15% to $166 million in the third quarter from the $144 million reported for the prior year. Coach enjoyed gains at retail for all indirect businesses, including international locations as well as in U.S. department stores.

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