01—Abstract
Summary
Summary of the 10-K filed August 19, 2009. Cited figures are marked; the original filing is the authoritative source.
Coach, Inc. reported fiscal 2009 (ended June 27, 2009) net sales of $3.23 billiona, up 1.6% from $3.18 billion in fiscal 2008, while operating income fell 15.3% to $971.9 million and diluted earnings per share fell 11.9% to $1.91.
Gross margin declined to 71.9% from 75.7%, driven by promotional activity in North American factory stores, channel mix, a sharper pricing initiative on handbags and women's accessories, and higher average unit cost. Selling, general and administrative expenses rose 7.2% to $1.35 billionb, with selling expenses up mainly on North American stores, Coach China and Coach Japan. The Direct-to-Consumer segment grew 6.6% to $2.73 billion and represented about 84% of net sales, while the Indirect wholesale segment fell 19.2% to $503.6 million as the company reduced shipments into U.S. department stores to manage customer inventory.
North American comparable store sales declined 6.8%. During the year Coach acquired its domestic retail businesses in Hong Kong, Macau and mainland China from its former distributor, ImagineX, and bought its New York corporate headquarters building for $126.3 millionc. The balance sheet remained strong, with stockholders' equity of $1.70 billion, cash and cash equivalents of $800.4 million, and long-term debt of $25.1 million.
The company repurchased 20.2 million shares during fiscal 2009 and initiated a quarterly cash dividend of $0.075d per share, with an expected annual rate of $0.30. The filing states that management expects to open about 20 new North American retail stores and about 10 Japan locations in fiscal 2010.
02—Key points
Key Highlights
- Net sales rose 1.6% to $3.23 billion, while operating income fell 15.3% to $971.9 million and operating margin declined to 30.1% from 36.1%.
- Diluted EPS fell 11.9% to $1.91; excluding items affecting comparability, diluted EPS decreased 7.2% to $1.91 versus the adjusted prior-year figure.
- Gross margin fell to 71.9% from 75.7%, driven by promotional activity in factory stores, channel mix and a sharper handbag and women's accessories pricing initiative.
- Direct-to-Consumer sales rose 6.6% to $2.73 billion (about 84% of net sales), while Indirect sales fell 19.2% to $503.6 million, mainly from lower U.S. wholesale shipments.
- North American comparable store sales declined 6.8%, attributed to decreased traffic in full-priced stores.
- Balance sheet stayed essentially debt-free, with $800.4 million in cash and cash equivalents and $1.70 billion in stockholders' equity.
- The company repurchased 20.2 million shares in fiscal 2009 and began a quarterly dividend of $0.075 per share, with $709.6 million remaining under the repurchase program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Tapestry kept $0.19.
- Revenue$3.23B100.0%
- Cost of revenue−$907.9M28.1%
- Gross profit$2.32B71.9%
- Operating costs−$1.35B41.8%
- Operating income$971.9M30.1%
- Interest, other & tax−$348.5M10.8%
- Net income$623.4M19.3%
Where FY2009 revenue went
$3.23B- SG&A: $1.35B, 42% of revenue
- Cost of revenue: $907.9M, 28% of revenue
- Net income: $623.4M, 19% of revenue
- Interest, other & tax: $348.5M, 11% of revenue
Kept 19% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed August 19, 2009Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $3.23B$3.18B | +1.6% |
| Cost of Revenue | $907.86M$773.65M | +17.3% |
| Gross Profit | $2.32B$2.41B | −3.5% |
| SG&A Expenses | $1.35B$1.26B | +7.2% |
| Operating Income | $971.91M$1.15B | −15.3% |
| Net Income | $623.37M$783.05M | −20.4% |
| EPS (Basic) | $1.93$2.20 | −12.3% |
| EPS (Diluted) | $1.91$2.17 | −12.0% |
| Shares Outstanding (Basic) | 323.71M355.73M | −9.0% |
| Shares Outstanding (Diluted) | 325.62M360.33M | −9.6% |
05—Questions
Frequently Asked Questions
Why did Coach's profitability decline in fiscal 2009?
Operating income fell 15.3% to $971.9 million as gross profit dropped 3.5% and SG&A expenses rose 7.2%. Gross margin fell to 71.9% from 75.7%, reflecting promotional activity in North American factory stores, channel mix, a sharper pricing initiative on handbags and women's accessories, and higher average unit cost.
How did the company's sales channels perform?
Direct-to-Consumer net sales rose 6.6% to $2.73 billion, driven by new and expanded stores, partly offset by a 6.8% decline in North American comparable store sales. Indirect net sales fell 19.2% to $503.6 million, primarily because U.S. wholesale shipments dropped 20.8% as the company managed customer inventory levels in a weaker sales environment.
What did Coach do with its capital in fiscal 2009?
Coach repurchased 20.2 million shares, purchased its New York corporate headquarters building for $126.3 million, and acquired its domestic retail businesses in Hong Kong, Macau and mainland China from ImagineX. Total capital expenditures were $240.3 million, and the company expects about $110.0 million in fiscal 2010.
What dividend policy did Coach adopt?
In April 2009 the Board declared a cash dividend at an expected annual rate of $0.30 per share. The first quarterly payment of $0.075 per share, about $23.8 million, was made on June 29, 2009, the first day of fiscal 2010.
What growth plans does management describe for fiscal 2010?
Management plans to open about 20 new North American retail stores (14 in new markets), about 10 new Japan locations and about 15 new China locations. It also cites expanding distribution in North America and China and improving store sales productivity, while noting that the macroeconomic environment makes productivity gains difficult.
06—Continue