01—Abstract
Summary
Summary of the 10-K filed August 25, 2010. Cited figures are marked; the original filing is the authoritative source.
Coach, Inc. (now Tapestry, Inc.) reported fiscal 2010, a 53-week year ended July 3, 2010, with net sales of $3.61 billiona, up 11.7% from $3.23 billion in fiscal 2009.
Direct-to-Consumer sales rose 15.7% to $3.16 billionb and represented approximately 87% of net sales, while the Indirect segment declined 10.3% to $451.8 million, driven by a 18.2% decrease in U.S. wholesale as the company controlled shipments into department stores. Operating income rose 18.3% to $1.15 billion, and operating margin increased to 31.9% from 30.1%, reflecting gross margin expansion to 73.0% from 71.9%. Diluted earnings per share rose 21.5% to $2.33, and net income was $734.9 million.
The company ended the year with cash, cash equivalents and investments of $702.4 millionc and described its balance sheet as essentially debt-free, with long-term debt of $24.2 million. Net cash from operating activities was $990.9 million. Coach spent $1.15 billion repurchasing common stock and paid $94.3 million in dividends during the year.
In April 2010 the Board approved a new $1.0 billiond repurchase program running through June 2012, with $559.6 million remaining at year-end, and raised the expected annual dividend rate to $0.60 per share from $0.30. Management plans continued growth through North American and China store expansion, with about 10 new North American retail stores and about 30 new mainland China locations planned for fiscal 2011, and capital expenditures of approximately $150 million expected for that year.
The company also noted that it is taking control of its Singapore and Malaysia retail operations and forming a European joint venture. Management cited a challenging retail environment in North America and Japan, with consumers still cautious.
02—Key points
Key Highlights
- Net sales increased 11.7% to $3.61 billion, including approximately $70 million from the 53rd week.
- Direct-to-Consumer net sales rose 15.7% to $3.16 billion; Indirect net sales fell 10.3% to $451.8 million.
- Operating income increased 18.3% to $1.15 billion, with operating margin of 31.9% versus 30.1% a year earlier.
- Diluted EPS rose 21.5% to $2.33; net income was $734.9 million.
- North American comparable store sales increased 3.5%, primarily due to improved conversion.
- Quarterly dividend increased to an expected annual rate of $0.60 per share from $0.30; $559.6 million remained under the repurchase program at year-end.
- Balance sheet described as essentially debt-free with $702.4 million of cash, cash equivalents and investments; operating cash flow was $990.9 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Tapestry kept $0.20.
- Revenue$3.61B100.0%
- Cost of revenue−$973.9M27.0%
- Gross profit$2.63B73.0%
- Operating costs−$1.48B41.1%
- Operating income$1.15B31.9%
- Interest, other & tax−$415.2M11.5%
- Net income$734.9M20.4%
Where FY2010 revenue went
$3.61B- SG&A: $1.48B, 41% of revenue
- Cost of revenue: $973.9M, 27% of revenue
- Net income: $734.9M, 20% of revenue
- Interest, other & tax: $415.2M, 12% of revenue
Kept 20% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed August 25, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $3.61B$3.23B | +11.7% |
| Cost of Revenue | $973.95M$907.86M | +7.3% |
| Gross Profit | $2.63B$2.32B | +13.4% |
| SG&A Expenses | $1.48B$1.35B | +9.8% |
| Operating Income | $1.15B$971.91M | +18.3% |
| Net Income | $734.94M$623.37M | +17.9% |
| EPS (Basic) | $2.36$1.93 | +22.3% |
| EPS (Diluted) | $2.33$1.91 | +22.0% |
| Shares Outstanding (Basic) | 311.41M323.71M | −3.8% |
| Shares Outstanding (Diluted) | 315.85M325.62M | −3.0% |
05—Questions
Frequently Asked Questions
How did Coach's core retail business perform in fiscal 2010?
Direct-to-Consumer sales rose 15.7% to $3.16 billion, driven by Company-operated stores in North America and China. North American comparable store sales increased 3.5%, and the company opened 12 net new retail stores and 10 new factory stores in North America.
Why did the Indirect wholesale segment decline?
Indirect net sales decreased 10.3%, driven primarily by an 18.2% decrease in U.S. wholesale as the company continued to control shipments into U.S. department stores to manage customer inventory levels amid a weak sales environment.
What are management's capital return plans?
In April 2010 the Board approved a new $1.0 billion repurchase program through June 2012, with $559.6 million remaining at year-end. The expected annual dividend rate was raised to $0.60 per share starting with the July 6, 2010 payment.
What growth plans does the company describe for fiscal 2011?
Management plans to open about 10 new North American retail stores and about 30 new mainland China locations, and about seven net new locations in Japan. Capital expenditures are expected to be approximately $150 million for fiscal 2011.
What risks does the filing highlight?
The filing cites economic conditions affecting consumer spending, intense competition from European luxury brands and private label retailers, risks of international expansion, foreign currency exposure in Japan and Canada, and global sourcing disruptions. It also notes that the company's wholesale customers may face a highly promotional environment.
06—Continue