Coach 2012 Annual Report Download - page 30

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. When
used herein, the terms ‘‘Coach,’’ ‘‘Company,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to Coach, Inc., including
consolidated subsidiaries.
EXECUTIVE OVERVIEW
Coach is a leading American marketer of fine accessories and gifts for women and men. Our product
offerings include women’s and men’s bags, accessories, business cases, footwear, wearables, jewelry, sunwear,
travel bags, watches and fragrance. Coach operates in two segments: Direct-to-Consumer and Indirect. The
Direct-to-Consumer segment includes sales to consumers through Coach-operated stores in North America;
Japan; Hong Kong, Macau and mainland China; Taiwan; Singapore and the Internet. Beginning with the first
quarter of fiscal 2013, this segment also includes Coach-operated stores in Malaysia and Korea. 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:
• Growing our Women’s business in North America through the growing accessories market and by
increasing our North American retail store base by opening stores in new markets and adding stores
in under-penetrated existing markets. We believe that North America can support about 500 retail
stores in total, including up to 30 in Canada. We expect to open about 10 net new retail stores and
18 factory outlets in fiscal 2013. The pace of our future retail store openings will depend upon the
economic environment and will reflect opportunities in the marketplace. In addition, 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 maximize productivity and continue to leverage our leadership
position in the market.
• Leverage the global opportunity for the Coach brand by raising brand awareness and building
market share in markets in which Coach is under-penetrated, most notably in Asia, where China is
our largest geographic growth opportunity, given the size of the market, its rate of growth, and our
increasing brand awareness. We currently plan to open about 30 new locations in China during fiscal
2013, with the majority in mainland China. We will continue to expand market share with the
Japanese consumer, driving growth in Japan primarily by opening new retail locations. We currently
plan to open approximately 13 net new locations, most notably Men’s locations, during fiscal 2013.
In addition to the acquisitions of our Singapore and Taiwan businesses during fiscal 2012, and
consistent with our strategy of directly operating key Asian markets, we have acquired our domestic
businesses in Korea and Malaysia subsequent to the end of fiscal 2012. Outside of Asia, we are
developing the brand opportunity as we expand into Europe and South America.
• Focus on the Men’s opportunity for the brand, notably in North America and Asia, while drawing on
our long heritage in the category. We have implemented a number of initiatives to elevate our Men’s
product offering through image-enhancing and accessible locations. We are leveraging the Men’s
opportunity by opening new locations in both full-price and factory, and as a productivity driver
with a broadened assortment, dual-gender stores and shop-in-shop store executions.
• Raise brand awareness and maximize e-commerce sales through our digital strategy, coach.com, our
global e-commerce sites and programs, third-party flash sites, marketing sites and social networking.
Our e-commerce programs include an invitation-only factory flash site targeted towards our most
loyal Factory exclusive customers. The Company utilizes and continues to explore implementing
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