- Fourth Quarter Net Sales Increased
15% Over Prior Year; Full Year Sales Rose 7%
- North America Comparable Store Sales
Increased 2% in the Fourth Quarter
- Fourth Quarter GAAP EPS was $0.29
Versus $0.04 a Year Ago; Non-GAAP EPS was $0.45 Versus $0.31 a Year
Ago
- Full Year GAAP EPS was $1.65 Versus
$1.45 a Year Ago; Non-GAAP EPS was $1.98 Versus $1.92 a Year
Ago
- Board Declares Quarterly
Dividend
Coach, Inc. (NYSE:COH) (SEHK:6388), a leading New York design
house of modern luxury accessories and lifestyle brands, today
reported fourth quarter and full year results for the period ended
July 2, 2016.
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Victor Luis, Chief Executive Officer of Coach, Inc., said, “Our
strong fourth quarter results – in which we achieved positive North
America comparable store sales and drove increases across key
financial metrics- capped a year where we returned the Coach brand
to growth. At the same time, we elevated brand perception globally.
I couldn’t be more pleased with our team’s execution of the
transformation plan over the last two years, as we tracked to our
goals in spite of the significant and unanticipated volatility in
tourist spending flows, as well as macroeconomic and promotional
headwinds. In the quarter, our North American direct business
accelerated, while we continued to implement strategic actions to
elevate our positioning and streamline our distribution in the
department store channel. Our international businesses continued to
grow, highlighted by double-digit increases in Mainland China and
Europe, as well as sales gains in our directly operated
businesses in Southeast Asia. Most importantly, we achieved the
expected inflection in profitability, as we leveraged our expenses
on the growth in the business.”
“We were also very pleased with the overall contribution of the
Stuart Weitzman brand for both the quarter and year, which outpaced
our original projections. We look forward to driving additional
synergies across the brands – notably in real estate, supply chain
and category expansion - while taking an increasing share of the
attractive and growing global footwear category.”
53rd Week
Discussion:
The results for the fourth quarter and fiscal year ending July
2, 2016 included 14 and 53 weeks, respectively, while the same
periods in fiscal 2015 included 13 and 52 weeks, respectively. The
53rd week contributed about $84 million to 2016 fourth quarter and
fiscal year sales, including $77 million in Coach brand revenue and
$7 million associated with Stuart Weitzman. The additional week
added $0.07 to earnings per diluted share.
Overview of Fourth Quarter 2016
Consolidated, Coach, Inc. Results:
- Net sales totaled $1.15 billion
for the fourth fiscal quarter, an increase of 15% on both a
reported and constant currency basis.
- Gross profit totaled $783
million on both a reported and non-GAAP basis, an increase of 14%
on a reported basis and 13%, on a non-GAAP basis. Gross margin for
the quarter was 67.8% on both a reported and non-GAAP basis
compared to 68.5% in the prior year on a reported basis and 69.0%
on non-GAAP basis.
- SG&A expenses totaled $666
million on a reported basis, an increase of 3%, and represented
57.7% of sales compared to 64.6% in the year-ago quarter. On a
non-GAAP basis, SG&A expenses were $608 million, an increase of
7%, or 52.7% of sales as compared to $566 million or 56.4% in the
year ago period.
- Operating income for the quarter
on a reported basis totaled $117 million, an increase of 200%,
while operating margin was 10.1% versus 3.9%. On a non-GAAP basis,
operating income was $175 million, an increase of 39%, while
operating margin was 15.1% versus 12.6%.
- Net interest expense was $7
million in the quarter as compared to $6 million in the year ago
period.
- Net income for the quarter on a
reported basis totaled $82 million, with earnings per diluted share
of $0.29. This compared to reported net income in the fourth
quarter of FY15 of $12 million with earnings per diluted share of
$0.04. On a non-GAAP basis, net income for the quarter totaled $126
million compared to $85 million a year ago, with earnings per
diluted share of $0.45, up 47% versus prior year.
Coach Brand Fourth Quarter of 2016
Results:
- Net sales for the Coach brand
totaled $1.07 billion for the fourth fiscal quarter, an increase of
11% on a reported and constant currency basis.
Fourth fiscal quarter sales results in each of Coach’s primary
segments were as follows:
- Total North American Coach brand
sales increased 9% on both a reported and constant currency
basis to $606 million including $44 million associated with
additional week of sales in this fiscal year versus $556 million
last year. North American direct sales rose 10% on a dollar basis
and 11% on a constant currency basis for the quarter. Total North
American comparable store sales increased 2% on a 13-week versus
13-week basis. This included the positive impact of e-commerce,
which contributed approximately one percentage point to comparable
store sales in the quarter. At POS, sales at North American
department stores declined at a mid-teens rate versus prior year on
a 13-week basis, while net sales into department stores declined
high single digits, reflecting the Company’s strategic actions in
this channel.
- International Coach brand sales
rose 15% to $450 million on a reported basis from $392 million last
year and 13% on a constant currency basis. Total sales in this
year’s fourth quarter included approximately $32 million associated
with the additional week of sales. Greater China sales increased 5%
in dollars on a 13-week basis with double-digit growth and positive
comparable store sales on the Mainland offset in part by continued
weakness in Hong Kong and Macau. On a constant currency basis,
Greater China sales rose 10% on a 13-week basis. In Japan, on a
13-week basis, sales rose 7% in dollars and declined 5% in constant
currency, as expected, given the anniversary of the dramatic
increase in Chinese tourists last spring. Sales for the remaining
directly operated businesses in Asia rose low-single digits in
dollars and posted solid growth in constant currency on a 13-week
basis, while Europe remained very strong, growing at a double-digit
pace driven by both distribution and comparable store sales
increases. At POS, sales in international wholesale locations
increased modestly, driven by strong domestic performance offset in
part by relatively weaker tourist location results. Net sales into
the channel decreased from prior year, as planned, negatively
impacted by shipment timing.
- Gross profit for the Coach brand
totaled $737 million, an increase of 10% on a reported and non-GAAP
basis. Gross margin for the quarter was 68.8%, including
approximately 110 basis points of pressure from currency, as
compared to 69.5% in the prior year period. Therefore, on a
constant currency basis, Coach brand gross margin increased 40
basis points versus last year.
- SG&A expenses totaled $622
million for the Coach brand on a reported basis, essentially even
with prior year, and represented 58.1% of sales compared to 65.0%
of sales in the prior year’s fourth quarter. On a non-GAAP basis,
SG&A expenses were $565 million, an increase of 4%, and
represented 52.8% of sales versus 56.8% in the year ago
period.
- Operating income for the Coach
brand on a reported basis was $115 million, up 164%, while
operating margin was 10.7% compared to operating margin of 4.5% a
year ago. On a non-GAAP basis, operating income was $171 million,
an increase of 40%, while operating margin was 16.0% compared to
operating margin of 12.7% on a non-GAAP basis a year ago.
Stuart Weitzman Fourth Quarter of 2016
Results:
- Net sales for the Stuart
Weitzman brand totaled $84 million for the fourth fiscal
quarter.
- Gross profit for the Stuart
Weitzman brand totaled approximately $46 million on both a reported
and non-GAAP basis, resulting in a gross margin of 54.8% on a
reported basis and 55.2% on a non-GAAP basis.
- SG&A expenses for the Stuart
Weitzman brand were $44 million, representing 52.6% of sales on a
reported basis. On a non-GAAP basis, SG&A expenses were $43
million or 50.8% of sales.
- Operating income for the Stuart
Weitzman brand was $2 million or 2.2% of sales as reported. On a
non-GAAP basis, operating income was $4 million representing an
operating margin of 4.4%.
During the fourth quarter of FY16, the company recorded the
following charges under its previously announced actions:
- Transformation Plan: charges of
approximately $8 million, consisting primarily of lease termination
charges and organizational efficiency costs.
- Operational Efficiency Plan: charges of
approximately $44 million, primarily related to organizational
efficiency costs.
- Acquisition-Related Costs: charges of
approximately $6 million associated with the acquisition of Stuart
Weitzman (which primarily includes charges attributable to
contingent payments and integration-related activities).
These actions taken together increased the company’s SG&A
expenses by about $58 million, negatively impacting net income by
$45 million after tax or about $0.16 per diluted share in the
fourth quarter.
Overview of Full Year 2016
Consolidated, Coach, Inc. Results:
- Net sales totaled $4.49 billion
for fiscal year 2016, an increase of 7% on a reported basis and 9%
in constant currency from fiscal 2015.
- Gross profit totaled $3.05
billion on a reported and non-GAAP basis, an increase of 5%. Gross
margin was 67.9% on a reported basis and 68.0% on a non-GAAP basis.
This compared prior year gross margin of 69.4% on reported basis
and 69.6% on non-GAAP basis.
- SG&A expenses totaled $2.40
billion on a reported basis, an increase of 5% and represented
53.4% of sales compared to 54.6% a year ago. On a non-GAAP basis,
SG&A expenses were $2.28 billion, an increase of 7%, and
represented 50.7% of sales as compared to 50.8% a year ago.
- Operating income totaled $654
million on a reported basis, an increase of 6%, while operating
margin was 14.5% versus 14.7% a year ago. On a non-GAAP basis,
operating income was $777 million, a decrease of 2%, while
operating margin was 17.3% versus 18.8% a year ago.
- Net interest expense was $27
million as compared to $6 million in fiscal 2015.
- Net income totaled $461 million
on a reported basis, up 14%, with earnings per diluted share of
$1.65. This included a contribution of $23 million or $0.08 per
share from Stuart Weitzman. On a non-GAAP basis, net income was
$552 million, an increase of 4%, with earnings per diluted share of
$1.98. This included a contribution of $33 million or $0.12 per
share from Stuart Weitzman.
- Inventory was $459 million at
the end of fiscal 2016 versus fiscal 2015 ending inventory of $485
million, a decrease of 5%.
Coach Brand Full Year 2016
Results:
- Net sales for the Coach brand
totaled $4.15 billion in fiscal year 2016, even with prior year. On
a constant currency basis, total sales increased 2%.
- Gross profit for the Coach brand
totaled $2.85 billion, a decrease of about 1% on both a reported
and non-GAAP basis. Gross margin for the year was 68.7%, including
approximately 100 basis points of pressure from currency.
Therefore, Coach brand gross margin was essentially even with prior
year on a constant currency basis.
- SG&A expenses totaled $2.23
billion for the Coach brand on a reported basis, a decrease of 2%,
and represented 53.7% of sales. On a non-GAAP basis, SG&A
expenses were $2.12 billion, essentially even with prior year, and
represented 51.1% of sales.
- Operating income for the Coach
brand on a reported basis was $621 million, essentially even with
prior year, while operating margin was 15.0%. On a non-GAAP basis,
operating income was $728 million, down 7%, while operating margin
was 17.6%.
Stuart Weitzman Full Year 2016
Results:
- Net sales for the Stuart
Weitzman brand totaled $345 million in fiscal 2016.
- Gross profit for the Stuart
Weitzman brand totaled $202 million on a reported basis and $204
million non-GAAP basis, resulting in a gross margin of 58.7% on a
reported basis and 59.1% on a non-GAAP basis.
- SG&A expenses for the Stuart
Weitzman brand were $170 million, representing 49.3% of sales on a
reported basis. On a non-GAAP basis, SG&A expenses were $155
million or 45.0% of sales.
- Operating income for the Stuart
Weitzman brand was $33 million or 9.4% of sales as reported. On a
non-GAAP basis, operating income was $48 million representing an
operating margin of 14.0%.
During the full fiscal year of 2016, the company recorded the
following charges under its previously announced actions:
- Transformation Plan: charges of
approximately $44 million, consisting primarily of organizational
efficiency costs, lease termination charges and accelerated
depreciation as a result of store renovations. Overall, total
charges under the Transformation Plan through July 2, 2016
were $322 million. The fourth quarter of fiscal 2016 was the last
reporting period in which charges will be incurred under this
plan.
- Operational Efficiency Plan: charges of
approximately $44 million, primarily related to organizational
efficiency costs.
- Acquisition-Related Costs: charges of
approximately $35 million associated with the acquisition of Stuart
Weitzman (which includes charges attributable to contingent
payments, and integration-related activities and limited life
purchase accounting).
These actions taken together decreased gross profit by $1
million and increased the company’s SG&A expenses by about $122
million, negatively impacting net income by $91 million after tax
or about $0.33 per diluted share in fiscal 2016.
The company also announced that its Board of Directors declared
a quarterly cash dividend of $0.3375 per common share, maintaining
an annual rate of $1.35. The dividend is payable on October 3, 2016
to shareholders of record as of the close of business on September
12, 2016.
Mr. Luis added, “Over the last two years we’ve made significant
investments transforming all aspects of the Coach brand and
business and are extremely gratified with the progress we’ve
achieved. We’ve made the right strategic decisions for the
long-term health of the business and have begun to see the benefits
of our actions manifest in our sales and profitability. Most
importantly, over the last fiscal year, we truly joined the fashion
conversation, through our first runway shows, elevating the
perception of the Coach brand and Coach, Inc., as we’ve earned
increasing acceptance as a house of modern luxury brands. We are
fusing our history and heritage of quality and craftsmanship with a
cool New York fashion relevance and it’s clearly resonating with
customers globally. We remain focused on amplifying our brand
message globally through innovative and desirable product, a
differentiated store concept, and marketing that cuts through.”
“And, as we’ve become a more nimble organization, we are laying
the foundation to compete more effectively in an increasingly
competitive and unpredictable global environment, while also
creating the operational agility to pursue our vision of defining
modern luxury for a new generation. Further, our FY16 performance
underscores our confidence in our ability to drive sustainable and
profitable growth for Coach, Inc., over the long term,” Mr. Luis
concluded.
Fiscal Year 2017
Outlook:
The following fiscal 2017 guidance is provided on a non-GAAP,
52-week basis versus 52-week basis.
The Company expects revenues for fiscal 2017 to increase by
low-to-mid single digits, including an expected benefit from
foreign currency of approximately 100-150 basis points based on
current exchange rates.
In addition, the Company is initiating an operating margin
forecast for Coach, Inc. of between 18.5-19.0% for fiscal 2017.
This guidance incorporates the negative impact of both Stuart
Weitzman and the strategic decision to elevate the Coach brand’s
positioning in the North American wholesale channel, including the
closure of about 25% of doors and a reduction in markdown
allowances. Excluding this impact, Coach brand operating margin
would be in the area of 20% in fiscal 2017, consistent with prior
guidance.
Interest expense is expected to be in the area of $25 million
for the year while the full year fiscal 2017 tax rate is projected
at about 28%.
Taken together, the Company is projecting double-digit growth in
both net income and earnings per diluted share for the year.
Fiscal Year 2017 Outlook - Non-GAAP Disclosure:
The Company is not able to provide a full reconciliation of the
non-GAAP financial measures to GAAP because certain material items
that impact these measures, such as the timing and exact amount of
charges related to our Operational Efficiency Plan and acquisition
related charges, have not yet occurred or are out of the Company’s
control. Accordingly, a reconciliation of our non-GAAP financial
measure guidance to the corresponding GAAP measures is not
available without unreasonable effort. The Company has identified
the estimated impact of the items excluded from its fiscal 2017
guidance.
This fiscal 2017 non-GAAP guidance excludes (1) expected pre-tax
charges of around $20 million to $35 million attributable to the
Company’s Operational Efficiency Plan (which will primarily include
the costs of replacing and updating the Company’s core technology
platforms, as well as office location and supply chain
consolidations) and (2) expected pre-tax Stuart Weitzman
acquisition charges of around $20 million (which will primarily
include the impact of contingent payments, and to a lesser extent
office lease termination charges).
Conference Call Details:
Coach will host a conference call to review these results at
8:30 a.m. (ET) today, August 9, 2016. 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, Global Head of
Investor Relations and Corporate Communications. A telephone replay
will be available starting at 12:00 p.m. (ET) 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.
The Company expects to report first quarter financial results on
Tuesday, November 1, 2016. To receive notification of future
announcements, please register at www.coach.com/investors
("Subscribe to E-Mail Alerts").
Coach, Inc. is a leading New York design house of modern luxury
accessories and lifestyle brands. The Coach brand was established
in New York City in 1941, and has a rich heritage of pairing
exceptional leathers and materials with innovative design. Coach is
sold worldwide through Coach stores, select department stores and
specialty stores, and through Coach’s website at www.coach.com. In
2015, Coach acquired Stuart Weitzman, a global leader in designer
footwear, sold in more than 70 countries and through its website at
www.stuartweitzman.com. Coach, Inc.’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 information to be made available in this press release may
contain forward-looking statements based on management's current
expectations. Forward-looking statements include, but are not
limited to, the statements under “Fiscal Year 2017 Outlook,” as
well as statements that can be identified by the use of
forward-looking terminology such as "may," "will," “can,” "should,"
"expect," "intend," "estimate," "continue," "project," "guidance,"
"forecast," "anticipated," “moving,” “leveraging,” “targeting,”
“assume,” “plan,” “pursue,” “look forward to,” “on track to
return,” “to achieve” or comparable terms. Future results may
differ materially from management's current expectations, based
upon a number of important factors, including risks and
uncertainties such as expected economic trends, the ability to
anticipate consumer preferences, the ability to control costs and
successfully execute our transformation and operational efficiency
initiatives and growth strategies and our ability to achieve
intended benefits, cost savings and synergies from acquisitions,
etc. Please refer to Coach Inc.’s latest Annual Report on Form 10-K
and its other filings with the Securities and Exchange Commission
for a complete list of risks and important factors.
COACH,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
For the Quarters
and Years Ended July 2, 2016 and June 27, 2015
(in millions,
except per share data)
(unaudited) (unaudited)
(audited) QUARTER ENDED YEAR ENDED
July 2,2016
June 27,2015
July 2,2016
June 27,2015
Net sales $ 1,154.6 $ 1,004.1 $ 4,491.8 $ 4,191.6
Cost of sales 371.9 316.4
1,440.5 1,283.0 Gross profit 782.7
687.7 3,051.3 2,908.6 Selling, general and administrative
expenses 665.9 648.9 2,397.8
2,290.6 Operating income 116.8 38.8
653.5 618.0 Interest (expense) income, net (7.4 )
(6.3 ) (26.9 ) (6.4 ) Income before
provision for income taxes 109.4 32.5 626.6 611.6 Provision
for income taxes 27.9 20.8 166.1
209.2 Net Income $ 81.5 $ 11.7
$ 460.5 $ 402.4 Net income per
share: Basic $ 0.29 $ 0.04 $ 1.66 $
1.46 Diluted $ 0.29 $ 0.04 $ 1.65
$ 1.45 Shares used in computing net
income per share: Basic 278.2 276.4
277.6 275.7 Diluted
281.1 278.5 279.3
277.2
COACH,
INC.
GAAP TO NON-GAAP
RECONCILIATION
For the Quarters
Ended July 2, 2016 and June 27, 2015
(in millions,
except per share data)
(unaudited)
July 2, 2016
GAAP Basis(As Reported)
Transformation andOther
Actions (1)
OperationalEfficiency Plan (2)
Acquisition-RelatedCosts (3) Non-GAAP
Basis(Excluding Items) Gross profit $ 782.7 $ - $
- $ (0.2 ) $ 782.9 Selling, general and administrative
expenses $ 665.9 $ 8.2 $ 43.9 $ 5.7 $ 608.1 Operating income
$ 116.8 $ (8.2 ) $ (43.9 ) $ (5.9 ) $ 174.8 Provision for
income taxes $ 27.9 $ (1.7 ) $ (10.3 ) $ (1.4 ) $ 41.3 Net
income $ 81.5 $ (6.5 ) $ (33.6 ) $ (4.5 ) $ 126.1 Diluted
net income per share $ 0.29 $ (0.02 ) $ (0.12 ) $ (0.02 ) $ 0.45
June 27, 2015 GAAP Basis(As Reported)
Transformation andOther Actions (1)
OperationalEfficiency Plan (2)
Acquisition-RelatedCosts (3) Non-GAAP
Basis(Excluding Items) Gross profit $ 687.7 $ - $
- $ (4.7 ) $ 692.4 Selling, general and administrative
expenses $ 648.9 $ 66.2 $ - $ 16.4 $ 566.3 Operating income
$ 38.8 $ (66.2 ) $ - $ (21.1 ) $ 126.1 Provision for income
taxes $ 20.8 $ (11.6 ) $ - $ (2.4 ) $ 34.8 Net income $ 11.7
$ (54.6 ) $ - $ (18.7 ) $ 85.0 Diluted net income per share
$ 0.04 $ (0.20 ) $ - $ (0.07 ) $ 0.31
(1)Amounts as of July 2, 2016 reflect
Coach brand charges primarily related
to lease termination charges and organizational efficiency costs.
Amounts as of June 27, 2015 related to Coach
brand accelerated depreciation and lease termination charges
as a result of store updates and closures and organizational
efficiency charges.
(2)Amounts as of July 2, 2016 reflect
Coach brand charges primarily related
to organizational efficiency costs and to a lesser extent, network
optimization costs.
(3)Amounts as of July 2, 2016 and June 27,
2015 represent charges attributable to acquisition-related costs
and limited life purchase accounting impacts, related to the
acquisition of Stuart Weitzman Holdings LLC.
The following charges were incurred
during the quarter ended July 2, 2016:
- Acquisition-related costs of $5.4
million, primarily related to contingent payments and
integration-related activities.
•Coach
brand: $4.2 million of these SG&A expenses were recorded
within the Coach brand, resulting in a $4.2 million decrease in
operating income.
•Stuart
Weitzman brand: $1.2 million of these SG&A expenses were
recorded within the Stuart Weitzman brand, resulting in an $1.2
million decrease in operating income.
- Limited life purchase accounting impacts
of $0.5 million, recorded within the Stuart
Weitzman brand, primarily due to the amortization of the
fair value of the limited life distributor relationships, resulting
in a $0.5 million decrease in operating income.
The following charges were incurred during the quarter
ended June 27, 2015: - Acquisition-related costs of
$13.6 million, primarily representing consulting and legal costs
related to the acquisition of Stuart Weitzman Holdings LLC, as well
as costs attributable to contingent payments related to the
acquisition.
•Coach
brand: $12.3 million of these SG&A expenses were
recorded within the Coach brand, resulting in a $12.3 million
decrease in operating income.
•Stuart
Weitzman brand: $1.3 million of these SG&A expenses were
recorded within the Stuart Weitzman brand, resulting in an $1.3
million decrease in operating income.
- Limited life purchase accounting impacts
of $7.5 million, recorded within the Stuart
Weitzman brand, primarily due to the amortization of the
fair value of the inventory step-up and order backlog asset,
resulting in a $7.5 million decrease in operating income.
COACH,
INC.
GAAP TO NON-GAAP
RECONCILIATION
For the Years
Ended July 2, 2016 and June 27, 2015
(in millions,
except per share data)
(unaudited)
July 2, 2016 GAAP Basis(As Reported)
Transformation andOther Actions (1)
OperationalEfficiency Plan (2)
Acquisition-RelatedCosts (3) Non-GAAP
Basis(Excluding Items) Gross profit $ 3,051.3 $ -
$ - $ (1.1 ) $ 3,052.4 Selling, general and administrative
expenses $ 2,397.8 $ 44.1 $ 43.9 $ 34.0 $ 2,275.8 Operating
income $ 653.5 $ (44.1 ) $ (43.9 ) $ (35.1 ) $ 776.6
Provision for income taxes $ 166.1 $ (10.7 ) $ (10.3 ) $ (10.9 ) $
198.0 Net income $ 460.5 $ (33.4 ) $ (33.6 ) $ (24.2 ) $
551.7 Diluted net income per share $ 1.65 $ (0.12 ) $ (0.12
) $ (0.09 ) $ 1.98
June 27, 2015 GAAP Basis(As
Reported) Transformation andOther Actions
(1) OperationalEfficiency Plan (2)
Acquisition-RelatedCosts (3) Non-GAAP
Basis(Excluding Items) Gross profit $ 2,908.6 $
(5.0 ) $ - $ (4.7 ) $ 2,918.3 Selling, general and
administrative expenses $ 2,290.6 $ 140.9 $ - $ 19.9 $ 2,129.8
Operating income $ 618.0 $ (145.9 ) $ - $ (24.6 ) $ 788.5
Provision for income taxes $ 209.2 $ (38.1 ) $ - $ (3.6 ) $
250.9 Net income $ 402.4 $ (107.8 ) $ - $ (21.0 ) $ 531.2
Diluted net income per share $ 1.45 $ (0.39 ) $ - $ (0.08 )
$ 1.92
(1) Amounts as of July 2, 2016 reflect
Coach brand charges primarily related
to organizational efficiency costs, lease termination charges and
accelerated depreciation as a result of store renovations. Amounts
as of June 27, 2015 related to Coach
brand accelerated depreciation and lease termination charges
as a result of store updates and closures, organizational
efficiency charges and charges related to the destruction of
inventory.
(2) Amounts as of July 2, 2016 reflect
Coach brand charges primarily related
to organizational efficiency costs and to a lesser extent, network
optimization costs.
(3) Amounts as of July 2, 2016 and June
27, 2015 represent charges attributable to acquisition-related
costs and limited life purchase accounting impacts, related to the
acquisition of Stuart Weitzman Holdings LLC.
The following charges were incurred
during the year ended July 2, 2016:
- Acquisition-related costs of $27.6
million, primarily related to contingent payments and
integration-related activities.
•Coach
brand: $19.4 million of these SG&A expenses were
recorded within the Coach brand, resulting in a $19.4 million
decrease in operating income.
•Stuart
Weitzman brand: $8.2 million of these SG&A expenses were
recorded within the Stuart Weitzman brand, resulting in an $8.2
million decrease in operating income.
- Limited life purchase accounting impacts of $7.5 million,
recorded within the
Stuart Weitzman brand, primarily
due to the amortization of the fair value of the order backlog
asset, limited life distributor relationships and inventory
step-up, resulting in a $7.5 million decrease in operating income.
The following charges were incurred during the year ended
June 27, 2015: - Acquisition-related costs of $17.1
million, primarily representing consulting and legal costs related
to the acquisition of Stuart Weitzman Holdings LLC, as well as
costs attributable to contingent payments related to the
acquisition.
•Coach
brand: $15.8 million of these SG&A expenses were
recorded within the Coach brand, resulting in a $15.8 million
decrease in operating income.
•Stuart
Weitzman brand: $1.3 million of these SG&A expenses were
recorded within the Stuart Weitzman brand, resulting in an $1.3
million decrease in operating income.
- Limited life purchase accounting impacts
of $7.5 million, recorded within the Stuart
Weitzman brand, primarily due to the amortization of the
fair value of the inventory step-up and order backlog asset,
resulting in a $7.5 million decrease in operating income.
The Company reports information in accordance with U.S.
Generally Accepted Accounting Principles ("GAAP"). The Company's
management does not, nor does it suggest that investors should,
consider non-GAAP financial measures in isolation from, or as a
substitute for, financial information prepared in accordance with
GAAP. Further, the non-GAAP measures utilized by the Company may be
unique to the Company, as they may be different from non-GAAP
measures used by other companies. The financial information
presented above, as well as gross margin, SG&A expense ratio,
and operating margin, have been presented both including and
excluding the effect of certain items related to our Transformation
Plan, our Operational Efficiency Plan and Acquisition-Related Costs
for Coach, Inc., as well as the Coach brand, which includes the
Company’s North America and International segment, as well as Other
and Corporate Unallocated results, and the Stuart Weitzman brand,
which includes the Company’s Stuart Weitzman segment. The Company’s
sales and earnings per diluted share results are presented both
including and excluding the impact of the 53rd week in fiscal year
2016.
The Company operates on a global basis and reports financial
results in U.S. dollars in accordance with GAAP. Percentage
increases/decreases in net sales and direct sales for the Company’s
North America segment and net sales for the Company, the Coach
brand, the Company’s International segment, Greater China, Coach
Japan and the Company’s remaining directly operated businesses in
Asia have been presented both including and excluding currency
fluctuation effects from translating foreign-denominated sales into
U.S. dollars and compared to the same periods in the prior quarter
and fiscal year. The Company calculates constant currency revenue
results by translating current period revenue in local currency
using the prior period’s monthly average currency conversion
rate.
Guidance for certain financial information for the fiscal year
ending July 1, 2017 has also been presented on a non-GAAP
basis.
Management utilizes these non-GAAP and constant currency
measures to conduct and evaluate its business during its regular
review of operating results for the periods affected and to make
decisions about Company resources and performance. The Company
believes presenting these non-GAAP measures, which exclude items
that are not comparable from period to period, is useful to
investors and others in evaluating the Company’s ongoing operating
and financial results in a manner that is consistent with
management’s evaluation of business performance and understanding
how such results compare with the Company’s historical performance.
Additionally, the Company believes presenting these metrics on a
constant currency basis will help investors and analysts to
understand the effect of significant year-over-year foreign
currency exchange rate fluctuations on these performance measures
and provide a framework to assess how business is performing and
expected to perform excluding these effects.
COACH,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
At July 2, 2016
and June 27, 2015
(in
millions)
(unaudited) (audited) July
2,2016 June 27,2015 ASSETS
Cash, cash equivalents and short-term investments $ 1,319.4 $
1,525.8 Receivables 245.2 219.5 Inventories 459.2 485.1 Other
current assets 149.1 276.1 Total current
assets 2,172.9 2,506.5 Property and equipment, net 919.5
732.6 Other noncurrent assets 1,800.3 1,427.8
Total assets $ 4,892.7 $ 4,666.9
LIABILITIES AND
STOCKHOLDERS' EQUITY Accounts payable $ 186.7 $ 222.8
Accrued liabilities 625.0 600.6 Current debt 15.0
11.3 Total current liabilities 826.7 834.7 Long-term
debt 861.2 879.1 Other liabilities 521.9 463.2 Stockholders'
equity 2,682.9 2,489.9 Total liabilities and
stockholders' equity $ 4,892.7 $ 4,666.9
COACH,
INC.
Store
Count
At March 26, 2016
and July 2, 2016
(unaudited)
As ofMarch 26, 2016 As
ofJuly 2, 2016
Directly-Operated
Store Count:
Openings (Closures)
Coach
North America 446 1 (15 ) 432 Japan 196 0 (1 ) 195
Greater China (PRC, Hong Kong & Macau) 181 8 (4 ) 185
Asia - Other 105 2 (4 ) 103 Europe 37 2 0 39
Stuart
Weitzman
Global (1) 61 15 (1 ) 75 (1) Amounts as of
July 2, 2016 include the impact of 14 retail stores related to our
Canadian retail distributor acquisition in the fourth quarter of
fiscal 2016.
COACH,
INC.
Store
Count
At June 27, 2015
and July 2, 2016
(unaudited)
As ofJune 27, 2015 As
ofJuly 2, 2016
Directly-Operated
Store Count:
Openings (Closures)
Coach
North America 462 5 (35 ) 432 Japan 196 3 (4 ) 195
Greater China (PRC, Hong Kong & Macau) 171 24 (10 ) 185
Asia - Other 102 7 (6 ) 103 Europe 34 6 (1 ) 39
Stuart
Weitzman
Global (1) 54 22 (1 ) 75 (1) Amounts as of
July 2, 2016 include the impact of 14 retail stores related to our
Canadian retail distributor acquisition in the fourth quarter of
fiscal 2016.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160809005446/en/
CoachAnalysts & Media:Andrea Shaw Resnick,
212-629-2618Global Head of Investor Relations and Corporate
CommunicationsorChristina Colone, 212-946-7252Director, Investor
Relations
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