Good day, ladies and gentlemen, welcome to the Coach Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Vice President of Investor Relations and Corporate Communications at Coach, Ms. Andrea Shaw Resnick. You may begin.

Good morning, and thank you for joining us. With me today to discuss our quarterly results are Lew Frankfort, Coach's Chairman and CEO; Mike Devine, Coach's CFO; and Mike Tucci, President of North America Retail, will also be joining us. Before we begin, we must point out this conference call will involve certain forward-looking statements including projections for our business in the current or future quarters or fiscal years. These statements are based upon a number of continuing assumptions. Future results may differ materially from our current expectations based upon risks and uncertainties such as expected economic trends or our ability to anticipate consumer preferences or control costs. Please refer to our latest annual report on Form 10-K for a complete list of these risk factors. Also please note that historical growth trends may not be indicative of future growth. We presently expect to update our estimates each quarter only; however, the failure to update this information should not be taken as Coach's acceptance of these estimates on a continuing basis. Coach may also choose to discontinue presenting future estimates at any time. Now let me outline the order of speakers and topics for this conference call. Lew Frankfort will provide an overall summary of our first fiscal 2006 results, and we'll also discuss our strategies, going forward. Mike Tucci will review our key initiatives for the holiday season, Mike Devine will conclude with details on financial and operational highlights for the quarter as well as our outlook for the second quarter and full fiscal year 2006. Following that, we will hold a question-and-answer session that will end by 9:30 a.m. I would now like to introduce Lew Frankfort, Coach's Chairman and CEO.

Thanks, Andrea, and good morning, everyone. As you know, we have once again announced excellent top-line growth and even stronger bottom-line results of 30% and about 50%, respectively, for the quarter just completed. Our quarterly results are especially impressive when you consider that we have achieved exceptional double-digit sales growth in the first quarter of each of the last four years, up 28% in '03, up 34% in '04, up 33% last year, and now up 30% in '06 for a four-year CAGR of over 31%, as sales have tripled. As most of you know, during the last several years, we have established a lane between the moderate segment and the old luxury accessory brands, which we termed "accessible luxury." This positioning coupled with our brand and business equities is Coach's competitive advantage yielding staying power, more predictable results, and increasing productivity. Some highlights of our first fiscal quarter were, first, net income rose 48% to $100 million, or $0.26 per share compared with $68 million, or $0.17 per share in the prior year. Including the impact of stock option expense, net income rose 53% to $94 million, or $0.24 per share compared with $61 million, or $0.16 per share in the prior year. Second, net sales totaled $449 million versus $344 million a year ago, a gain of 30%. Third, direct-to-consumer sales, which now include sales generated by Coach Japan rose 29% to $315 million from $244 million in the prior year. Fourth, U.S. same-store sales for the quarter rose 25.1% with retail stores up 14.4% and factory stores up 35.8%. It is worth mentioning that in U.S. retail, we have achieved a double-digit comp in the first quarter in each of the last four fiscal years, 21% in '03, 29% in '04, 17% in '05, and now 14%…

Thanks, Lew. As mentioned in our release, our transitional and fall offerings were remarkably successful across all categories and collections. We began the quarter with Hampton's Weekend offered in a new fall palette, which also featured a great signature scarf print version for the first time. Also in July we brought back an updated Soho collection in leather, suede, and mini signature, which included novelty studded and ocelot styles. In August, the Chelsea handbag group, offered in leather, Nubuc, and Optic signature was very well received. In September, our popular Hamptons collection returned for a sixth season and performed strongly across all fabrications, leather, suede, and signature as well as a stripe application on our classic signature fabric. This fall, the collection also included a stylish update on the carryall, which was particularly successful, actually selling out in certain sizes and colors. Throughout the quarter, we were extremely pleased with consumers' response to our more sophisticated Silhouette and luxurious materials, as Limited Edition styles sold extremely well at higher price points. Examples of Limited Edition styles, which blew out and speaks to the ongoing opportunity to selectively trade up our average retail in handbags include the Optic signature chenille tote at $598, the signature python striped satchel, and the Soho studded flap satchel, both at $498. More broadly, a key driver of our success in Q1 was a planned shift in color selling from brights; that is, pinks and greens, to more neutral shades such as warm browns and khakis. For holiday, building on this shift in the marketplace, you will see a broad range of neutrals complemented by pops of reds as well as a stronger patchwork statement. In addition, many of our items will offer stylish embellishments such as metallics, fur, and beading, which are particularly suitable for…

Thank you, Mike. Within an ever-changing environment, Coach remains true to our proven formula for success. We continue to stand apart from the competition based upon our five touchstones, distinctive brand, leadership position, loyal consumer base, multi-channel international distribution, and our focus on innovation and the consumer. Our strong and seasoned management team, relevant and exciting product supported by our dynamic global supply chain continues to sustain our unique position in the marketplace. The Coach brand has never been stronger nor has our proposition ever been more vibrant, thus positioning us to capitalize on the abundant growth opportunities ahead of us and to achieve continued excellent financial results in the years ahead. To this point, as most of you know, we have been implementing four key strategies that focus on sustaining growth. First, most generally, we are building market share in the growing North American women's accessories market by leveraging our unique position as an accessible luxury lifestyle brand. As part of this strategy, we've been emphasizing new usage occasions such as weekend or evening, and offering novelty and Limited Edition products to heighten our cachet, especially with our top-tier customers. Our second strategy is the continued rapid growth in U.S. retail. We plan to add 100 U.S. retail stores over the next four to five years, bringing the retail store base to at least 300. During FY06 we intend to open about 25 new retail stores, which will include 8 new full-priced markets for Coach, Wilmington, Delaware, and Memphis, Tennessee, two stores we opened already in the first quarter. The other six will be stores in Oklahoma City; Naples, Florida; Albany, New York; Reno, Nevada; Fresno, California; and Omaha, Nebraska. In keeping with our strategy to expand our most productive locations, we will be expanding at least six U.S.…

Thank you, Lou. Lou and Mike have just taken you through the highlights and strategies. Let me now take you through some of the important financial details of our first quarter results. As mentioned, our quarterly revenues increased by 30%, direct-to-consumer, which now includes CJI and represents about three-quarters of our business was up 29%, and our indirect segment was up 34%. Net income for the quarter before option expense increased 48% to $100 million, or $0.26 per share as compared to $68 million, or $0.17 per share in the year-ago period. Results for the first quarter were ahead of the consensus estimate of $0.25 per share. Including after-tax option expense of about $7 million in both periods, net income for the quarter increased 53% to $94 million from $61 million a year ago. It should be noted that option expense on a per-share basis in both quarters was flat at just under $0.02. Our operating income before option expense rose 40% to $156 million in the first quarter versus the same period last year. Operating margin on this basis in the quarter was 34.8% of sales compared to 32.5% in the year-ago quarter. Including option expense in both periods, operating income rose 44% year-over-year, and the operating margin expanded 310 basis points from 29.2% of sales to 32.3%. In the first quarter our gross profit margin expanded by 100 basis points over the comparable period of the prior year, from 75.0% to 76.0% of sales. There are two primary contributors to this quarterly improvement. First, the positive impact of product mix driven by increased penetration of higher margin, Limited Edition, and mixed material collections and, second, our sourcing cost initiatives. Selling, general, and administrative expense ratio before option expense declined 130 basis points in the quarter and represented 41.3%…