This summary is based on the first quarter fiscal 2008 earnings call conducted by Coach Inc. (COH: chart) on October 23, 2007.
Chairman and Chief Executive Officer: Lew Frankfort
Chief Financial Officer: Mike Devine
President of North American Retail: Mike Tucci
Senior Vice President of Investor Relations: Andrea Shaw Resnick
Key Investors Issues
- The earnings per share rose to 41 cents from 34 cents in the prior year.
- Quarterly revenue rose 28% over the previous year to $676.7 million.
- In Q1, Coach repurchased three million shares at an average cost of $43.72.
- For fiscal 2008, the company expects to generate sales of about $3.17 billion.
First Quarter Fiscal 2008 Financial Highlights
The company reported an increase of 32% in earnings per diluted share on a continuing operations basis to 41 cents from 31 cents per diluted share a year ago.
This substantial increase in earnings from the prior year''s first quarter reflected a 28% gain in net sales combined with operating margin improvement. Net income rose 34% to $155 million compared with $115 million in the prior year.
In the first quarter, net sales were $677 million compared with the $529 million reported in the same period of the prior year.
- Direct-to-consumer sales increased 26% to $508 million from $404 million last year. US comparable store sales for the quarter rose 19.3%, with retail stores up 10.8% and factory store sales up 27.3%. In Japan, sales rose 17% on a constant-currency basis, while dollar sales rose 15% adjusted for a weaker yen. As projected, comparable location sales in Japan rose at a low-single-digit rate for the quarter. The growth in Japan was fueled primarily by distribution through both new stores and expansions augmented by low single digit comparable location sales.
- Indirect sales increased 35% to $169 million in the first quarter from the $125 million reported for the prior year. Coach enjoyed excellent gains at POS for all indirect businesses, notably U.S. department stores.
During the quarter, gross profit rose 28% to $518 million from $406 million a year ago.
Gross margin was 76.6% versus 76.7% a year ago.
- SG&A expense, as a percentage of net sales, were well below prior year levels in the first quarter, representing 41.3% of sales versus 42.6%, as the firm continues to deliver spending leverage against strong, top line growth.
- For the first fiscal quarter, operating income totaled $239 million, up 32% from the $181 million reported in the comparable year ago period, while operating margin rose to 35.3%, a 120 basis point improvement from the 34.1% reported for the prior year.
During the quarter, the company opened 13 retail stores and three factory stores in North America, bringing the total to 272 retail stores and 96 factory stores.
In addition, nine retail stores and four factory stores were expanded. In Japan, Coach opened four locations and expanded one, taking the total to 146 at the end of the quarter.
The company repurchased and retired three million shares of its common stock at an average cost of $43.72.
At the end of the period, $368 million was available under the company''s current repurchase authorization.
Inventory levels at quarter end were $363 million.
The inventory levels were well controlled and were up only 21% from prior year levels but do include investments in key holiday initiatives, which position the firm well for the season. Further, this inventory level allows the company to support 51 net new U.S. stores, 15 net new locations in Japan and substantially increased sales levels from the year ago period.
