01—Abstract
Summary
Summary of the 10-K filed August 19, 2011. Cited figures are marked; the original filing is the authoritative source.
Coach, Inc. (now Tapestry, Inc.) reported fiscal 2011 net sales of $4.16 billiona, up 15.3% from $3.61 billion in fiscal 2010, with net income of $880.8 million and diluted earnings per share of $2.92, up 25.5% from $2.33.
Operating income rose 13.5% to $1.30 billionb, although operating margin declined to 31.4% from 31.9% as gross margin eased to 72.7% from 73.0%. Direct-to-Consumer sales reached $3.62 billion (87.1% of net sales), led by North American stores, where comparable store sales rose 10.6%. Indirect sales were $536.6 million, up 18.8%.
The company continued its store expansion. It ended fiscal 2011 with 723 Coach-operated stores, including 345 North American retail stores, 143 North American factory stores, 169 Coach Japan locations and 66 Coach China locations. For fiscal 2012, it plans about 15 net new North American retail stores, 25 factory outlets and about 30 new mainland China locations.
It also expects capital expenditures of about $200 millionc. Cash returns to shareholders were significant. Coach repurchased about $1.10 billion of common stock in fiscal 2011 and approved a new $1.5 billion program in January 2011, with $961.6 million remaining at year end.
The Board raised the quarterly dividend to an expected annual rate of $0.90d per share starting with the July 2011 payment. Operating cash flow was $1.03 billion, and the company reported long-term debt of $23.4 million, which it describes as an essentially debt-free balance sheet. The filing also notes that the March 2011 earthquake and tsunami in Japan reduced sales by about $20 million in the third quarter and about $26 million in the fourth quarter.
02—Key points
Key Highlights
- Net sales rose 15.3% to $4.16 billion, and diluted EPS rose 25.5% to $2.92 in fiscal 2011.
- Operating income increased 13.5% to $1.30 billion; operating margin was 31.4% versus 31.9% in fiscal 2010.
- North American comparable store sales increased 10.6%, primarily due to improved conversion.
- Store base grew to 723 Coach-operated stores, with plans for about 15 net new North American retail stores, 25 factory outlets and about 30 new mainland China locations in fiscal 2012.
- Operating cash flow was $1.03 billion; cash, cash equivalents and investments totaled $712.8 million, and long-term debt was $23.4 million.
- Coach repurchased about $1.10 billion of stock in fiscal 2011 and has $961.6 million remaining under a $1.5 billion program authorized in January 2011.
- The quarterly dividend was increased to an expected annual rate of $0.90 per share, and the Japan earthquake and tsunami reduced sales by about $20 million in Q3 and $26 million in Q4.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Tapestry kept $0.21.
- Revenue$4.16B100.0%
- Cost of revenue−$1.13B27.3%
- Gross profit$3.02B72.7%
- Operating costs−$1.72B41.3%
- Operating income$1.30B31.4%
- Interest, other & tax−$424.1M10.2%
- Net income$880.8M21.2%
Where FY2011 revenue went
$4.16B- SG&A: $1.72B, 41% of revenue
- Cost of revenue: $1.13B, 27% of revenue
- Net income: $880.8M, 21% of revenue
- Interest, other & tax: $424.1M, 10% of revenue
Kept 21% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed August 19, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $4.16B$3.61B | +15.3% |
| Cost of Revenue | $1.13B$973.95M | +16.5% |
| Gross Profit | $3.02B$2.63B | +14.8% |
| SG&A Expenses | $1.72B$1.48B | +15.8% |
| Operating Income | $1.30B$1.15B | +13.5% |
| Net Income | $880.80M$734.94M | +19.8% |
| EPS (Basic) | $2.99$2.36 | +26.7% |
| EPS (Diluted) | $2.92$2.33 | +25.3% |
| Shares Outstanding (Basic) | 294.88M311.41M | −5.3% |
| Shares Outstanding (Diluted) | 301.56M315.85M | −4.5% |
05—Questions
Frequently Asked Questions
How did Coach perform financially in fiscal 2011?
Net sales increased 15.3% to $4.16 billion, operating income rose 13.5% to $1.30 billion, and net income reached $880.8 million, compared with $734.9 million in fiscal 2010. Diluted EPS was $2.92, up from $2.33. Gross margin slipped to 72.7% from 73.0%, and operating margin fell to 31.4% from 31.9%.
Which sales channels drove growth?
The Direct-to-Consumer segment grew 14.8% to $3.62 billion and represented 87.1% of net sales, driven by company-operated stores in North America and China. The Indirect segment grew 18.8% to $536.6 million, led by Coach International and U.S. Wholesale. North American comparable store sales rose 10.6%.
How is Coach returning capital to shareholders?
Coach repurchased about $1.10 billion of common stock in fiscal 2011 and had $961.6 million remaining under its $1.5 billion program approved in January 2011, which runs through June 2013. The Board raised the dividend to an expected annual rate of $0.90 per share starting with the July 5, 2011 payment, up from $0.60 per share in fiscal 2010.
What are the company's plans for fiscal 2012?
Coach expects to open about 15 net new North American retail stores and 25 factory outlets, and about 30 new locations in mainland China. It plans about 15 net new locations in Japan and expects total capital expenditures of about $200 million, mainly for new stores and technology supporting global expansion.
Did any events affect results in fiscal 2011?
The March 2011 earthquake and tsunami in Japan reduced sales by about $20 million in the third quarter and about $26 million in the fourth quarter, lowering earnings per share by about two and a half cents and three and a half cents, respectively. Fiscal 2011 operating income also included $25.7 million of charitable foundation contributions, which the company excluded from its non-GAAP measures.
06—Continue