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Original Source: FD (FAIR DISCLOSURE) WIRE
. Andrea Shaw Resnick, Coach, Inc., VP, IR . Lew Frankfort, Coach, Inc., Chairman, CEO . Mike Tucci, Coach, Inc., President, Retail Division - North America . Mike Devine, Coach, Inc., CFO
Management announced 1Q05 net income of $68m or $0.35 per share, an increase of 60% YoverY and ahead of analysts consensus estimates of $0.33 per share. Guidance was given for 2H05 EPS of $0.64 and FY05 EPS of $1.78, above consensus estimates of $1.73. Q&A Focus: Store openings and remodelings, Japanese business, new products.
A. Key Data From Call 1. Net income rose 60% to $68m or $0.35 per share. 2. Net sales = $344m, up 33%. 3. GM = 75% of sales. 4. SG&A expense ratio = 42.6% of sales. 5. 1Q05 results were ahead of consensus estimate of $0.33 per share. 6. Inventory at 10/2/04 was $204m. 7. DSOs = 32 days. 8. Cash and marketable securities =$549m. 9. Company repurchased and retired 2.4m shares of common stock at average cost of $39.06 10. Capex = $17m. 11. FY05 capex guidance = $85m. 12. 2H05 net sales guidance = $505m. 13. 2H05 EPS guidance = $0.64. 14. FY05 net sales guidance = $1.6b. 15. FY05 EPS guidance = $1.78. 16. Expect 2H05 EPS of at least $0.79 per share, with quarters roughly equal.
S1. 1Q05 Results Summary (L.F.) 1. 1Q05 Highlights: 1. Excellent top line growth and even stronger bottom line results of 33% and 60% respectively. 2. Strong double-digit sales growth in 1Q of each of last three years. 1. Up 28% on '03, 34% in '04. 2. 3-year average of nearly 32%. 3. Business and brand propositions are distinctive. 1. Established lane between moderate segment and luxury accessory brands. 4. Positioning is COH's competitive advantage, yielding staying power, predictable results and increasing productivity. 5. Net income rose 60% to $68m or $0.35 per diluted share. 1. Compares to $42m or $0.22 per share in 1Q04. 6. Net sales were $344m vs. $258m a year ago, up 33%.
7. Direct to consumer sales, primarily sales at US Coach stores,
rose 30% to $175m, from $134m in 1Q04. 8. US chain store sales rose 15.1% with retail stores up 16.8% and factory store sales up 13.5%. 1. In US retail, have achieved a double digit comp in 1Q of each of last three years. 1. 21% in '03, 29% in '04, and 17% in '05. 2. On average, stores are 80% more productive than three years ago. 3. Sales in Japan grew 30% in constant currency. 1. Driven by new stores, expansions and retail comps.
4. Opened five US retail stores, including three in new markets, Des Moines, Sarasota, and Tucson. 1. Opened five factory stores, the full complement of factory openings for this year. 2. Relocated and expanded full-price store in Palm Beach, FL. 5. At end of quarter, 179 full price stores and 81 factory stores. 9. Indirect sales rose 36% to $169m YoverY. 1. Driven by 39% dollar increase in sales at Coach Japan. 10. US department store results continue to be excellent at POS and shipment growth. 11. International wholesale posted very strong results on ship-in and sell-through bases. 12. Added four locations and expanded six in Japan.
1. Three small shop-in-shops were closed. 13. In August, opened first flagship outside Tokyo, in Sapporo. 1. $300,000 in sales in first three days. 2. 103 locations in Japan at quarter end.
14. Executed growth plans and performance outpaced goals. 15. Confident in ability to sustain growth and deliver excellent results. 1. Especially pleased with US full-price business, which had increases in average ticket and traffic in own stores and
significant increases in US department store POS sales. 1. Driven by monthly flow of fresh and relevant products, especially handbags and women's small leather goods. 2. US factory store business surged, due to higher mall traffic and strength of brand despite sharply reduced level of promotions. 3. US branded women's accessory category is growing at unprecedented levels. 4. Target customers continue to increase handbag consumption. 1. Consumer's most recent purchase behavior is best predictor of future spending. 2. Trend points to new, higher and sustainable level of category spending. 2. Coach Japan Performance: 1. Sales rose 39% in dollars and 30% in yen. 2. Market share continued to grow rapidly. 3. Emphasis on distribution growth is working. 4. In total, sales to Japanese consumers worldwide rose estimated 40%, nearly 50% outside Japan and 30% domestically. 1. Remarkable considering flat performance of imported brands in Japan and COH's growth in recent years. 5. 1Q05 growth was fueled by distribution as square footage grew over 25% through new stores and expansions.
1. Augmented by mid-single-digit same retail location sales. 6. Significant improvement in operating margin. 1. Bottom line results were driven by expansion in GM and ability to leverage expense base.
S2. Product Performance and Holiday Initiative (M.T.) 1. Transitional and Fall Offerings …