Coach 2006 Annual Report Download - page 8

a bar code scanning warehouse management system. Coach’s distribution center employees use handheld radio frequency scanners to read
product bar codes, which allow them to more accurately process and pack orders, track shipments, manage inventory and generally
provide better service to our customers. Coach’s products are primarily shipped to Coach retail stores and wholesale customers via Federal
Express and common carrier, and direct to consumers via Federal Express.
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The foundation of Coach’s information systems is its Enterprise Resource Planning system. This fully integrated system supports all
aspects of finance and accounting, procurement, inventory control, sales and store replenishment. The system functions as a central
repository for all of Coach’s transactional information, resulting in increased efficiencies, improved inventory control and a better
understanding of consumer demand. This system is fully scalable to accommodate rapid growth.
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Complementing its Enterprise Resource Planning system are several other system solutions, each of which Coach believes is well suited
for its needs. The data warehouse system summarizes the transaction information and provides a single platform for all management
reporting. The supply chain management system supports sales and inventory planning and reporting functions. Product fulfillment is
facilitated by Coach’s highly automated warehouse management system and electronic data interchange system, while the unique
requirements of Coach’s internet and catalog businesses are supported by Coach’s order management system. Finally, the point-of-sale
system supports all in-store transactions, distributes management reporting to each store, and collects sales and payroll information on a
daily basis. This daily collection of store sales and inventory information results in early identification of business trends and provides a
detailed baseline for store inventory replenishment. Updates and upgrades of these systems are made on a periodic basis in order to ensure
that we constantly improve our functionality. All complementary systems are integrated with the central Enterprise Resource Planning
system.
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Coach owns all of the material trademark rights used in connection with the production, marketing and distribution of all of its
products, both in the U.S. and in other countries in which the products are principally sold. Coach also owns and maintains worldwide
registrations for trademarks in all relevant classes of products in each of the countries in which Coach products are sold. Major trademarks
include Coach, Coach and lozenge design, Coach and tag design and Signature C design. Coach is not dependent on any one particular
trademark or design patent although Coach believes that the Coach name is important for its business. In addition, several of Coach’s
products are covered by design patents or patent applications. Coach aggressively polices its trademarks and trade dress, and pursues
infringers both domestically and internationally. It also pursues counterfeiters domestically and internationally through leads generated
internally, as well as through its network of investigators, the Coach hotline and business partners around the world.
Coach’s trademarks in the United States will remain in existence for as long as Coach continues to use and renew them. Coach has no
material patents.
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Because Coach products are frequently given as gifts, Coach has historically realized, and expects to continue to realize, higher sales
and operating income in the second quarter of its fiscal year, which includes the holiday months of November and December. In addition,
fluctuations in sales and operating income in any fiscal quarter are affected by the timing of seasonal wholesale shipments and other events
affecting retail sales. However, over the past several years, we have achieved higher levels of growth in the non holiday quarters, which has
reduced these seasonal fluctuations. We expect that these trends will continue.
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Most of Coach’s imported products are subject to existing or potential duties, tariffs or quotas that may limit the quantity of products
that Coach may import into the U.S. and other countries or may impact the cost of such products. Coach has not been restricted by quotas
in the operation of its business and customs duties have not comprised a material portion of the total cost of its products. In addition, Coach
is subject to foreign governmental regulation and trade restrictions, including U.S. retaliation against certain prohibited foreign practices,
with respect to its product sourcing and international sales operations.
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The premium handbag and accessories industry is highly competitive. The Company mainly competes with European luxury brands
as well as private label retailers, including some of Coach’s wholesale customers. Over the last several years the category has grown rapidly,
encouraging the entry of new competitors as well as increasing the competition from existing competitors. However, the Company believes
that as a market leader we benefit from this increased competition as it drives consumer interest in this brand loyal category.
The Company believes that there are several factors that differentiate us from our competitors, including but not limited to: distinct
newness, innovation and quality of our products, ability to meet consumer’s changing preferences and our superior customer service.
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