Coach 2012 Annual Report Download - page 15

ITEM 1A. RISK FACTORS
You should consider carefully all of the information set forth or incorporated by reference in this
document and, in particular, the following risk factors associated with the Business of Coach and
forward-looking information in this document. Please also see ‘‘Special Note on Forward-Looking
Information’’ at the beginning of this report. The risks described below are not the only ones we face.
Additional risks not presently known to us or that we currently deem immaterial may also have an adverse
effect on us. If any of the risks below actually occur, our business, results of operations, cash flows or
financial condition could suffer.
The current economic conditions could materially adversely affect our financial condition, results of
operations and consumer purchases of luxury items.
The current uncertain global economic conditions are having a significant negative impact on businesses
around the world. Our results can be impacted by a number of macroeconomic factors, including but not
limited to consumer confidence and spending levels, unemployment, consumer credit availability, raw
materials costs, fuel and energy costs, global factory production, commercial real estate market conditions,
credit market conditions and the level of customer traffic in malls and shopping centers.
Demand for our products, and consumer spending in the premium handbag and accessories market
generally, is significantly impacted by trends in consumer confidence, general business conditions, interest
rates, the availability of consumer credit, and taxation. Consumer purchases of discretionary luxury items,
such as Coach products, tend to decline during recessionary periods, when disposable income is lower. The
general economic conditions in the economy may continue to affect consumer purchases of our products for
the foreseeable future and adversely impact our results of operations.
The growth of our business depends on the successful execution of our growth strategies, including our
efforts to expand internationally.
Our growth depends on the continued success of existing products, as well as the successful design and
introduction of new products. Our ability to create new products and to sustain existing products is affected by
whether we can successfully anticipate and respond to consumer preferences and fashion trends. The failure to
develop and launch successful new products could hinder the growth of our business. Also, any delay in the
development or launch of a new product could result in our company not being the first to bring product to
market, which could compromise our competitive position.
Additionally, our current growth strategy includes plans to expand in a number of international regions,
including Asia and Europe. We currently plan to open additional Coach stores in China and other international
markets, and we have entered into strategic agreements with various partners to expand our operations in
Europe. In addition, we have recently taken control of certain of our retail operations in the Asia-Pacific
region, including Taiwan, Malaysia and South Korea during calendar year 2012. We do not yet have
significant experience directly operating in these countries, and in many of them we face established
competitors. Many of these countries have different operational characteristics, including but not limited to
employment and labor, transportation, logistics, real estate, and local reporting or legal requirements.
Furthermore, consumer demand and behavior, as well as tastes and purchasing trends may differ in these
countries, and as a result, sales of our product may not be successful, or the margins on those sales may not
be in line with those we currently anticipate. Further, such markets will have upfront short-term investment
costs that may not be accompanied by sufficient revenues to achieve typical or expected operational and
financial performance and therefore may be dilutive to Coach in the short-term. In many of these countries,
there is significant competition to attract and retain experienced and talented employees. If our international
expansion plans are unsuccessful, our financial results could be materially adversely affected.
Significant competition in our industry could adversely affect our business.
We face intense competition in the product lines and markets in which we operate. Our competitors are
European and American luxury brands as well as private label retailers, including some of Coach’s wholesale
customers. There is a risk that our competitors may develop new products that are more popular with our
customers. We may be unable to anticipate the timing and scale of such product introductions by competitors,
12