Coach 2007 Annual Report Download - page 17

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

The following discussion of Coach’s financial condition and results of operations should be read together with Coach’s financial
statements and notes to those statements included elsewhere in this document.

Coach is a leading American marketer of fine accessories and gifts for women and men. Our product offerings include handbags,
women’s and men’s accessories, footwear, jewelry, wearables, business cases, sunwear, watches, travel bags and fragrance. Coach operates
in two segments: Direct-to-Consumer and Indirect. The Direct-to-Consumer segment includes sales to consumers through Company-operated
stores in North America and Japan, the Internet and Coach catalog. The Indirect segment includes sales to wholesale customers in the U.S.
and international locations as well as licensing revenue. As Coach’s business model is based on multi-channel international distribution, our
success does not depend solely on the performance of a single channel or geographic area.
In order to sustain growth within our global framework, we continue to focus on two key growth strategies: increased global
distribution, with an emphasis on North America, Japan, and Greater China, and improved productivity. To that end we are focused on
four key initiatives:
•Build market share in the growing North American women’s accessories market. As part of our culture of innovation and
continuous improvement, we are implementing a number of initiatives to accelerate the level of newness, elevate our product offering
and enhance the in-store experience. These initiatives will enable us to continue to leverage our leadership position in the market.
•Grow our North American retail store base by adding stores within existing markets and opening in new markets. We plan to add
about 40 retail stores in North America in each of the next several years and believe that North America can support about 500 retail
stores in total, including up to 20 in Canada. In addition, we will continue to expand select, highly productive retail and factory
locations.
•Expand market share with the Japanese consumer, driving growth in Japan primarily by opening new retail locations and expanding
existing ones. We plan to add about 10 net new locations in fiscal 2009 and believe that Japan can support about 180 locations in
total. We will also continue to expand key locations.
•Raise brand awareness in emerging markets to build the foundation for substantial sales in the future. Specifically, Greater China,
Korea and other emerging geographies are increasing in importance as the handbag and accessories category grows in these areas. In
fiscal 2009, through distributors, we intend to open at least 20 net new wholesale locations in emerging markets and five locations in
Greater China.
The growth strategies outlined above will allow us to continue to deliver long-term superior returns on our investments and drive
increased cash flows from operating activities.

During fiscal 2008, an increase in net sales continued to drive net income and earnings per share growth. The highlights of fiscal 2008
were:
•Earnings per diluted share from continuing operations increased 28.8% to $2.17 per diluted share. Excluding one-time items of
$0.11 per diluted share, earnings per diluted share increased 21.9% to $2.06 per diluted share.
•Net income from continuing operations increased 23.0% to $783.0 million. Excluding one-time items of $41.0 million recorded in the
fourth quarter, net income increased 16.6% to $742.0 million.
•Net sales increased 21.8% to $3.18 billion.
•Direct-to-consumer sales rose 21.0% to $2.54 billion.
•Comparable sales in Coach’s North American stores rose 9.8%.
20

•Coach Japan sales, when translated into U.S. dollars, rose 23.4% driven primarily by expanded distribution. These increases in
sales reflect a 9.0% increase due to currency translation.
•In North America, Coach opened 38 net new retail stores and nine new factory stores, bringing the total number of retail and factory
stores to 297 and 102, respectively, at the end of fiscal 2008. We also expanded 18 retail stores and 19 factory stores in North
America.
•Coach Japan opened 12 net new locations, bringing the total number of locations at the end of fiscal 2008 to 149. In addition, we
expanded 11 locations.
During the fourth quarter of fiscal 2008, the Company recorded certain one-time items that resulted in a net gain of $41.0 million. These