Coach Gazes Towards Japan

Coach Inc. (New York) announced a 76 percent gain in earnings during its fiscal fourth quarter ending June 30, 2001, and the formation of Coach Japan Inc., a joint venture with Sumitomo, to expand its base to Japanese shoppers.

The Japanese initiative is expected to produce growth in part through an expanding Asian store base that is becoming increasingly lucrative for the company. Coach cited continued double-digit increases in comparable location sales to Japanese consumers worldwide. “We are looking to double our market share to 6 percent in Japan over the next three to four years,” said ceo Lew Frankfort. “We're looking to achieve $100 million in retail sales in Japan in fiscal 2002 and we see our sales comfortably doubling [there] to nearly $200 million at retail.” European competitor Louis Vuitton has about 18 percent of the Japanese market.

New handbag styles, including the Signature fabric and leather pieces introduced in February, were credited with helping boost Coach's sales, management said. “In fact,” said Frankfort, “60 percent of the company's total sales for the year were new product introductions.”

For the fiscal year ended June 30, 2001, net sales rose 12 percent and net income increased 73 percent. (Including the costs of a reorganization charge related to the closing of a manufacturing facility in Florida, which was taken in the first quarter, the net income gain was 66 percent.)

Direct to consumer sales, which consist primarily of sales at Coach stores, rose 10 percent during the quarter. The company said these results were generated by new and expanded stores as well as comparable store sales, which rose 1.6 percent, with retail stores up 1.9 percent and factory stores up 1.4 percent. For the full year, direct to consumer sales rose 11 percent and comp- store sales increased 3.2 percent overall, with retail stores up 2.1 percent and factory stores up 4.3 percent.

During the fourth quarter, the company opened seven Coach retail stores and two Coach factory stores, bringing the total to 121 retail stores and 68 factory stores — an increase of 15 Coach retail stores and five Coach factory stores from the 106 and 63, respectively, in operation a year ago. Also, five retail stores were renovated during the quarter, bringing the total number of renovated stores for fiscal 2001 to 28. At the end of the fiscal year, through new store openings and renovations, 77 stores, representing approximately 80 percent of retail sales volume, reflected the new retail format.

Following the earnings report, the maker of luxury leather goods told investors and analysts on a conference call that it expects successful new styles to continue driving sales through the fall season, forecasting sales to grow 14 to 18 percent in the its fiscal first quarter. The Signature and Hamptons collections are expected to continue to be the key drivers for fall, Frankfort said.

Coach designs and produces classically styled, high-quality leather goods and accessories for men and women, including luggage, purses, outerwear, and gloves, and also licenses its name for watches (including Movado), footwear, furniture and eyewear. It runs over 170 stores in the U.S. and plans to open 50 new stores by 2003. It also sells its wares through department stores in the U.S. and in 18 other countries.

The company also announced that executive creative director Reed Krakoff had been named Accessories Designer of the Year by the Council of Fashion Designers of America.