Coach 2008 Annual Report Download - page 22

TABLE OF CONTENTS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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.
Executive Overview
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, travel bags, fragrance and watches. 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, Japan, Hong Kong, Macau and mainland China, the Internet and Coach catalog. The Indirect segment includes
sales to wholesale customers and distributors in over 20 countries, including the United States, and royalties earned on licensed product. 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 and China, and improved store sales productivity. To that end we are focused on four key
initiatives:
•Build market share in the North American women’s accessories market. As part of our culture of innovation and continuous
improvement, we have implemented 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.
•Continue to grow our North American retail store base primarily by opening stores in new markets and adding stores in existing
markets. We believe that North America can support about 500 retail stores in total, including up to 30 in Canada. We currently
plan to open approximately 20 new retail stores in fiscal 2010, of which 14 will be in new markets. The pace of our future retail
store openings will depend upon the economic environment and reflect opportunities in the marketplace.
•Continue to expand market share with the Japanese consumer, driving growth in Japan primarily by opening new retail locations.
We believe that Japan can support about 180 locations in total. We currently plan to open approximately 10 new locations in Japan in
fiscal 2010.
•Raise brand awareness in emerging markets, notably in China, where our brand awareness is increasing and the category is
developing rapidly. In September 2008, Coach successfully completed the first phase of our acquisition of our retail businesses in
China, transitioning eight stores in Hong Kong and two stores in Macau. The acquisition of our retail business in mainland China
was completed in April 2009, transitioning 15 stores. We currently plan to open approximately 15 new locations in China in fiscal
2010.
We believe the growth strategies outlined above will allow us to deliver long-term superior returns on our investments and drive increased
cash flows from operating activities. However, the current macroeconomic environment has created a very challenging retail market in which
it is difficult to achieve productivity gains. The Company believes long-term growth can still be achieved through a combination of
expanded distribution, a focus on innovation to support productivity and disciplined expense control. Our multi-channel distribution model
is diversified and includes substantial international and factory businesses, which reduces our reliance upon our full-price U.S. business.
With an essentially debt-free balance sheet and significant cash position, we believe we are well positioned to manage through this economic
downturn.
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