Good day, and 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 at Coach, Miss Andrea Shaw Resnick, you may begin.

Good morning. Thank you for joining us. With me today to discuss our quarterly results are Lew Frankfort, Coach's Chairman and Chief Executive Officer, Mike Devine, Coach's Chief Financial Officer, and Mike Tucci, President of North American Retail will also be joining us. Before we begin, we must point out that this conference call will involve certain forward-looking statements, including projections for our business in the current or future quarters or fiscal year. 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. Please refer to our latest annual report on Form 10-K for a complete list of the risk factors. Also please note that the 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 speakers and topics for this conference call. Lew Frankfort will provide an overall summary of our second fiscal quarter 2006 results and will also discuss our strategies going forward. Mike Tucci will review the holiday season from the U.S. Retail perspective and discuss key initiatives for the spring season ahead. Mike Devine will conclude with details on financial and operational highlights for the quarter as well as our outlook for the second half and full fiscal year 2006. Following that, we will hold a Q&A session that will end by 9:30 a.m. I'd now like to introduce Lew Frankfort, Coach's Chairman and CEO.

Thanks, Andrea, and good morning, everyone. Once again, I'm delighted to be speaking with you today about another excellent Coach holiday performance, which evidenced the strength of the Coach franchise, our position as a gift authority and the vibrancy of the U.S. handbag and accessory category. As you know, Coach once again announced excellent sales and earnings growth of 22% and over 35% respectively for the quarter just completed. Our results are especially impressive when you consider that Coach has achieved exceptional double-digit sales growth in each of the last four holiday quarters for a CAGR of nearly 30%. Some highlights of our second fiscal quarter were--First, net income before option expense rose 36% to $183 million or $0.47 per share compared with $134 million or $0.34 per share in the prior year. Including the impact of stock option expense, net income rose 37% to $174 million or $0.45 per share compared with $127 million or $0.32 per share in the prior year. Second, net sales totalled $650 million versus 532 million a year ago, a gain of 22%. Third, direct to consumer sales, which now includes sales generated by Coach Japan, rose 21% to $504 million from 416 million in the prior year. Fourth, U.S. same-store sales for the quarter rose 19.9% with retail stores up 12.8% and factory stores up 30.2%. It's worth mentioning that in U.S. retail stores, we have achieved a double-digit comp in the second quarter in each of the last four fiscal years. And these, our full-price stores, on average are 76% more productive than they were just four holidays ago, even in this, our most developed quarter. Finally, sales in Japan rose 20% in constant currency, driven by new stores, expansions, and high single-digit retail comps as we continue to grow our market…

Thank you, Lew. As mentioned in our release, our holiday offerings were remarkably well received across categories, collections, and price points. Overall sales were driven by handbags and women's accessories, while letter charms, iPod covers and cell phone lanyards were great giftables at sharp price points. In fact, during the quarter, about a third of the improvement in average transaction size came from an increase in UPT's or units per transaction, driven by this multiple price point gifting strategy. As expected, we capitalized on the trend away from brights in the marketplace, as consumers responded enthusiastically to our neutral palet, complicated by pops of red as well as the stronger patchwork statement. In addition, many of our items offered stylish embellishments, such as metallics, fur, and beading. Specifically, our key item strategy was a success. As you know, we merchandise several key items in statements with the objective of representing 60% of our sales. We bought these items aggressively with dominant in-store merchandising and featured them in our holiday advertising campaigns. Together, they actually represented slightly more than the 60% forecast. We opened the quarter with gallery totes and duffels, which were our key handbag initiatives for the holiday season and performed very well throughout the quarter. In November, we brought in our ever popular holiday patchwork statement, which this year included a duffel and dummy silhouette, as well as the quilted ski group in Madison, our evening collection spanning many categories. Finally, our Resort group was expanded into leather and was also well received. Overall for the quarter, we were delighted with the breadth of our appeal, not only at our mid-range price points, but also the success of our entry-level handbag offerings, such as the Soho small flap at $198 and the higher-priced limited edition pieces, including the…

Thanks, Mike. I believe that it's important to look at our holiday results in the context of the overall sustainability of our growth proposition. Our distinctive business model is based upon the underlying principle that Coach offers accessible luxury, American lifestyle accessories to a loyal and growing consumer base. We provide consumers with fresh, relevant, and innovative products that are extremely well made at an excellent price. By doing so, Coach is able to continually strengthen our leadership position by building lasting market share. This premise is essential to our belief that we will achieve sustainable growth in the years ahead and continue to expand our market share within this rapidly growing, premium accessories market. To this point, as most of you know, we have been implementing four key strategies that focus on sustaining growth. First, most generally, we're building market share in the growing North American Women's Accessories market by leveraging our leadership position as an accessible luxury lifestyle brand. As part of this strategy, we've been emphasizing new usage occasions, such as weekend, evening, baby, 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 years, bringing the retail store base to at least 300. During FY '06, we intend to open about 25 new retail stores, which will include 9 new full-priced markets for Coach. Four of these have already opened. They are in Wilmington, Memphis, Oklahoma City, and Naples. The remaining five will open during the balance of the fiscal year and will include locations in Albany, Reno, Knoxville, Fresno, and Omaha. In total, we expect to open about 15 stores during the second half of this…

Thank you, Lew. Lew 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 second quarter results. As mentioned, our quarterly revenues increased by 22% with direct-to-consumer now including Coach Japan and representing about three-quarters of our business, up 21%. While indirect rose 26%. It's worth noting that if the yen had remained flat to last year, our sales would have totaled about $665 million, up 25% in total with our direct-to-consumer business also up 25%. Net income for the quarter before option expense increased 36% to $183 million or $0.47 per share as compared to $134 million or $0.34 per share in Q2 last year. Including after-tax option expense of about 8.8 million this year and 7.2 million in the year-ago quarter, net income for the quarter increased 37% to $174 million from 127 million a year ago. It should be noted that option expense on a per-share basis in both quarters totalled about $0.02. Results of $0.45 per share for the second quarter were ahead of the consensus estimate of $0.44 per share and our guidance of $0.43 per share, including option expense. Our operating income before option expense rose 29% to $289 million in the second quarter versus the same period last year. Operating margin on this basis in the quarter was 44.4% compared to 42% even in the year-ago quarter, a 240 basis point improvement. Including option expense in both periods, operating income rose 30% year-over-year, and the operating margin expanded 230 basis points from 39.8% to 42.1% of sales. In the second quarter, our gross profit margin expanded by 180 basis points over the comparable period of the prior year from 75.8% to 77.6% of sales. Both sourcing cost, benefits,…

Good morning.

Good morning, Bob. Lew, just had a question for you.

Could you guys elaborate a little bit more on the strength of UPTs this quarter and if you do expect that to continue, where did it come from this quarter?

Sure, Mike will field it.

Sure. Bob as you know, a significant driver for us in productivity has been ADT, and in the past, it's really been driven almost exclusively through pricing advantages. We took a different approach in Q2 and really went after the opportunity to build on units per transaction, and about a third of our high single-digit ADT growth was driven through an increase in UPTs. Some information behind that. One, a broader range of opening price point handbags and I think a stronger offer at entry-level handbag prices as well as more offerings on what we would call add-on opportunities, things like letter charms, iPod cases, a strong wristlet offering, eyewear as an example, and that really helped to drive the add-on purchase and build our UPT program in-store. We had a strong selling focus against it, and to your point in terms of future opportunity, we certainly see the opportunity to go after UPT as a productivity driver with specific gift-giving and gift occasion opportunities like Valentine's Day and Mother's Day, but those are real piece of our success story with our overall gift strategy for Q2.

Great. And just as a follow-up question. Would you guys maybe elaborate a little bit more on how you see 3Q and 4Q sales breaking down?

Go ahead, Mike.

Sure. We're targeting Bob as you talked about, for the back half of the year, or as we talked about in the prepared remarks for the back half of the year of about $1 billion. We've seen similar trends to what we've seen in the back half of our last couple fiscal years with a stronger Q4 than Q3, so being slightly ahead Q4 versus Q3.

Okay, great. Thank you. Congratulations.

You're very welcome.

Thank you. Our next question comes from Dana Telsey of Bear Stearns. You may go ahead.

Good morning, everyone, and congratulations.

Thank you, Dana.

The gross margin gain was very impressive. What do you see as your opportunity go forward and the breakdown between the sourcing gains, product mix shifts? Where do you see it coming from? And also, the pricing spectrum, how do you see that evolving both in accessories and handbags? And just lastly, can you give us an update on the licensed product? Thank you.

Okay. That's, I think there were three questions in there, Dana, so why don't, Mike D., I will take the gross margin rates question first, and then Mike T. can take pricing, perhaps and Lew on Licensing.

Perfect.

But in terms of the gross margin, we are thrilled with where we landed there. The majority of the Q2 increase came from our sourcing benefits where we did get some help from Keith Monda's supply chain organization, and also we benefited to a degree from the fact that the product that sold through in Japan was bought with a stronger yen, and that worked its way through. That last factor won't necessarily continue in a strong way into the second half, but we still are quite optimistic that we have year-over-year margin expansion opportunity in the back half of the year, driven by continued improvement in product mix, in non-leather product categories and also further expansion of our Limited Edition and Novelty product offerings, and we'll continue to work the supply chain hard. So we believe we can see gross margin expansion in the back half of the year approaching another 70 to 100 basis points versus second half of LY.

On the pricing side, Dana, I think the key, I would emphasize that we really want to focus on balance in our pricing. If we look at Q2, we had another very strong quarter in what we would call special product, and if we look at the penetration there, it was almost 18% total special product versus about 11 last year, and as I said in the prepared comments, limited edition, our highest-priced offerings, which defined as offerings that are about 70% higher than our core offering, primarily in handbags and women's accessories, were at about 6% versus 2. Having said that, we're really focusing on looking at our mix by store type and maintaining and protecting our range of offer in our key categories. We do believe that there is a strong aspirational consumer out there at entry-level price points, and we want to remain friendly and accessible to her, while at the same time really take advantage of the head room that we have for a better product and a more pinnacle product in select stores. That's really the strategy going forward.

Okay.

With regard to our licensing product, we had a banner holiday season in women's footwear, at U.S. department stores sales were up a spectacular 50% during the holiday quarter and over 35% during the entire fall season. And when we spoke with retailers across the board, they've said that our assortment was on point and we feel really enthusiastic about the direction and development of our women's footwear. In Coach stores, as you know, we only offer our footwear in, I think it's about 55 or 60 of our stores, and footwear in those stores represented about 7% of sales, and the growth kept pace with the overall growth in other categories, which usually is not the case during the holiday quarter. In terms of sunwear, we're still in early stages, and for us on sunwear, as you know, Dana, is a full store rollout program for us, and we had a excellent holiday quarter where sales approached our 2% in sunwear. In terms of our overall license sales, both in optical and sunwear are only in the second year of our launch and we're doing extremely well.

Thank you very much.

You're welcome.

Thank you. Our next question comes from Margaret Mager of Goldman Sachs. You may go ahead.

Hi. Another great quarter, congratulations on that.

Thank you, Margaret.

I wanted to ask about merchandising, the factory outlet stores. Do you look at your stores the same way as the full-priced stores in terms of tiering them to go out, go after a fashion, core, et cetera? And can you talk about, how do you decide when is the right time to move product out of the full-price stores into the factory outlet stores? How does that whole decision process work? Thanks.

Mike T. will answer that.

Okay. On tiering, Margaret, the short answer is we have not fully developed a tiered model in factory yet. That's an opportunity. That's a real go-forward opportunity for us. Having said that, the driver in factory is still monthly flow of newness. The cadence there is very similar to what we do in our full priced store, obviously the product is different. Again, in Q2, about 75% of our sales in the quarter was through made-for-factory merchandise. It's a strong number. About half of that was factory exclusive, and that's a fair target in terms of how we're approaching the business going forward. We will develop more of a tiered point of view in our stores as we develop our store base and expand high-performing stores that will allow us to show additional product. So that's really the approach. In terms of the delete schedule, that's really done off of our master merchandising calendar on a global basis, where we map that out in our long-range plan and then work backwards annually and quarterly, tied, obviously, to the whole sales schedule so that our timing, for example, when we might be off price in department stores on seasonal clearance with when that product may show up in a factory store. The factory stores really provide us with the opportunity to keep the front end and driving piece of the brand, our full-priced stores very fresh, very liquid, and very clean and allow us not to have a clearance position in any full-priced store ever, with the exception of shoes on a seasonal basis.

I guess I'm curious about the novelty and limited edition, which is now running at 18% of your full-priced stores. It appears to me, visiting the factory outlets that, some of this product is moving very quickly into the factory outlet stores, and that's what I'm trying to get at. How is that decision process, like when do you decide that something should move pretty quickly out of a full-priced store into a factory outlet environment? And what kind of product is eligible for that? And then lastly, on factory outlets, the signature product, what's the philosophy there? Thank you for your answers.

Okay. Actually, in terms of deleting limited edition and special product to factory stores, we buy that merchandise very, very tight and plan it at extremely high sell-throughs. You will see pieces here and there in the stores, and many times as an example, you might see product in Q3 that was in a full-priced store in Q2 in a very small way. It does stand out a little bit more in a factory store because it looks odd in the clearance section, but the fact of the matter is that our clearance penetration overall in factory stores is very low, and it's coming down as we buy our full-priced much tighter and get better at allocating in full price, that has lowered our liability in factory stores, and we're making up for that with more made-for-factory products. So I think we're really looking at it, it's a different consumer and we want to maximize margin opportunities and turn our inventory. And as far as signature is concerned, really the factory stores, there are about 58 factory stores that carry some form of signature product. Again, the primary vehicle there is to drive liquidation of liability product that we own in the Coach universe, and we'll look at ways to expand on that or to develop that business in the future, but again, we're in the early stages on signature liquidation in factory stores.

I saw your Naples store. It's terrific and extremely well located. So good luck in that new market.

Thank you very much.

Thank you.

Take care.

Thank you. The next question comes from Jeff Edelman from UBS Securities. You may go ahead.

Thank you and good morning. First question, Mike Tucci, it looks as if the spread between your comp store sales and total retail sales in the U.S. widened. Would this be a factor of the Madison Avenue store or are we seeing increased productivity from some of the other new stores added over the last 12 months?

It's a good pickup, and the reality is that a lot of it is just timing. Based on when we open new stores. We had a significant number of stores that opened late in Q1 and Q2. Some of the shifts in the Madison Avenue opening impacted our spread, and the number has remained fairly constant, but we're really looking at our spread opportunities longer-term as being, getting more stores opened earlier in our annual cycle. That's really the biggest opportunity that we face, and I think that the Madison Avenue impact is only slight in the total.

Okay, thanks. And then Lew or the other Mike, I was just over in China, and I had two takeaways. One, it appears as if leather duties were going to increase this spring, doubling; secondly, wage costs are going up fairly significantly. Have you got the opportunity with either greater volume with factories and/or sourcing efficiencies to at least offset or more than offset this as we look out into calendar '06?

The other Mike will take that one, Jeff. The good news is, is we've looked into the proposed changes to the duty structure. It will not impact Coach as we import the leather into the country rather than buy leather supply in China. The movement of the wan is a potential impact for us, but it is very small. The value add in China, the labor content, and the profit that our factories make is a very small component of cost of goods sold, and we would anticipate that the blocking and tackling throughout the supply chain will largely be able to offset it, should the wan devalue in the coming year.

Great. Thank you.

Thank you. Our next question comes from Neely Tamminga from Piper Jaffray. You may go ahead.

Great, good morning. And I'll add my congrats on a great quarter.

Thank you.

Mike Devine, can you talk a little bit about cash? And I mean, obviously, you guys are amassing a lot of it here very quickly, considering you've done stock buybacks and Sumitomo purchase. Kind of what are some of your updated thoughts as we look over the next 6 to 12 months of how you might be using that cash in addition to your already planned rollout of stores and what have you? And then maybe too, Mike Tucci, if you could talk a little about gift cards. I mean, obviously giftables were part of the business, but wondering how gift cards might have played a role as well this holiday for Coach.

I'll address the cash from the first point of view. We are, as we talked about, at a level very similar to last year as a result of the spend on the buyback and Sumitomo. As you point out, we have $150-plus million available to us via the share repurchase program. We would intend to execute against that selectively, being an opportunistic buyer the stock, but we are in a position where we are going to see a cash build, and the business is operating exceptionally well and generating cash, and we are able to continue to meet our growth momentum targets by spending the $120 million CapEx level to open the 30 new stores here in the U.S. and the 12 net new in Japan, so you will continue to see a cash build as we focus on a single-concept strategy and optimizing the Coach brand.

On the gift card activity, we saw very modest improvement in sales in gift cards. We will see some of those redemptions come through in January, and we feel like we had a focus on it. It was featured in our holiday gift guide, which was available both through mail circulation and in-store, and we do see, obviously that our customer really likes to touch and feel the product and really wants to be engaged with the product, both in stores and on-line.

Great, thank you.

You're welcome.

Thank you. Our next question comes from Mark Friedman of Merrill Lynch. You may go ahead.

Thank you. Good morning, congratulations on the quarter, guys.

Thank you, Mark.

Lew, I was wondering, it's only been a short time since Madison stores reopened, I was wondering what learnings you may already have from there that you may be applying to other stores, either flagship or to the chain. And then in Japan, what is going on as far as your use of special limited edition product, and is there plans to grow that business there? Thank you.

Sure. First, with regard to 595 Madison Avenue, where most importantly, I'm extremely pleased with the performance of the store. The store is doing extremely well. We couldn't be happier. In terms of the store design and fixturing, we believe that we've achieved our objective of creating a global flagship that elevates and advances the brand. There's no doubt when consumers are in this store and they spend time there, that they see a world of Coach that brings them into the future, and many of the elements, including some of the, what we would call layering, the upholstery, carpets, draperies, tables are elements that we will incorporate selectively in our chain as we move forward. With regard to a limited edition product. In Japan, there is a very large opportunity for us to grow that business. It's actually somewhat less developed than our businesses in the United States with regard to what we call limited edition. It's only running about 3% of sales compared to 6%. So we're at early stages in Japan. There's opportunities in all parts of the business, so we're enthusiastic about that.

Thank you.

You're welcome.

Thank you. Our next question comes from Christine Chen of Pacific Growth Equities. You may go ahead.

Thank you. Congratulations on a wonderful quarter.

Thanks, Christine.

Wanted to ask about the Baby product. How has that been performing and are there plans to further grow that business or was that sort of a test that you were running for the holiday season?

The first thing about the Baby product is that it brings a smile to people's faces when they come into the store. It's a bit of a surprise. It's an addition that has been really anchored by what we call Baby bags. The Baby bags are an enormous opportunity for us, and we will be continuing Baby in a capsule group with a focus on a range of Baby totes for the new mom and the new dad.

Thank you.

Thank you. Our next question comes from Erwin Ramberg of HSBC.

Yes, hi, good morning, everyone. This Alan Obelo (ph) from HSBC. I had two quick questions on Japan. During the previous conference call, you mentioned you were seeing a pickup in the Japanese market as of the end of '05. How do you see this market evolving through '06? And just a second question is on currency. How is the weak yen impacting profits? Is there a delayed impact thanks to hedging? And in terms of sales, do you intend to increase prices in Japan to mitigate the weaker yen as many European competitors have done recently?

I'll answer the first part, Erwin, and first off, thank you for your recent initiation on Coach. We do appreciate that. With regard to the market, we're encouraged that there are signs of growth in the luxury sector within accessories, and you know what it's like, growth begets growth. We think our luxury competitors are doing a better job in terms of providing product that is relevant and innovative, and we're looking to see growth continue through calendar '06. I think the luxury brands are getting on point, and we welcome that. Mike?

Yes, in terms of the impact of the yen on our rates of profitability, the total impact is relatively small. Coach Japan, obviously, operates the business completely in yen and their full-fledged financial statements are then converted back, so every line of the P&L is effectively reduced from the top line to net income but changed only by the change in rate of the yen, so the pure conversion does not move our earnings per share materially. Where it does impact rate of profitability is through the gross margin line, and as we have mentioned, as I mentioned earlier, that was a assist to us in Q2 and will be a mitigating factor, or I'm sorry, have a negative impact on gross margin in the second half of the year, but we've built that into the guidance as we've talked about earlier on this call.

Okay, thank you.

Thank you. Our next question comes from Paul Lejuez from CSFB.

Hey, it's Paul Lejuez, Credit Suisse. Kind of a big picture question, Lew. About a year ago, you made a comment about the organization being in the third inning, I believe you said. Just wondering if you could maybe give us an update. Where are you now? And if you maybe could break it down U.S. verse Japan? And then kind of as a follow-up, what does the seventh or eighth inning look like for you guys? Thanks.

It's a very good question, Paul. First, with the growth in the category in North America and over 70% of our business occurring in North America we see our market share growing only modestly year on year, and in fact, we often say that we're in the fourth inning we've been, we're having the second year where we have the opportunity to play the fourth inning because the growth in the category is so strong, but we expect category growth within the world of accessories to continue, fueled in part by Coach and by competitors, who seem to come and go for the most part, at least in North America. Relative to the eighth and ninth inning, it's too far out for me to speculate. I used to think it was when the business was $3.5 billion. That was about two years ago, but with the growth in the overall market in North America and size of growth in Japan, you never can tell.

All right. Thanks, guys. Best of luck.

Thank you.

Thank you. Our next question comes from Jennifer Black of Jennifer Black & Associates. You may go ahead.

Hi. Let me add my congratulations as well.

Thank you, Jennifer.

I had a couple questions. I wondered if you could tell us how many pinnacle stores you have in both the factory and full-priced stores and where you would see that over the next three years?

Mike?

Sure. In our full-priced chain, we have about 18 stores that we've designated as pinnacle stores. In factory, we really don't have any that we've defined as pinnacle.

Okay.

As I said earlier, on the factory side, we do see the development of a tiered merchandising strategy as a real opportunity for us going forward. Within that, we would take a similar game plan to what we've done in full price, where we'd have probably three tiers of stores, let's say flagship, fashion, and core, and our roughly 85-store base would be broken down accordingly. That work is underway as we start to look into FY '07. The major opportunity for FY '07 in full price is to continue to graduate stores up a level. So more core stores being defined as fashion, which would impact their mix; more fashion stores being defined as flagship stores, which would impact their mix, and driving that number up, and we have a significant movement planned in FY '07 away from the number of core stores that we've had traditionally into more fashion and flagship stores. Included in that would be pinnacle stores.

Okay. And then can you speak to your thoughts on a couple categories, that it seems like you would have opportunities? And I guess one would be bags that have straps across your body, maybe ergonomic, longer straps. Two business bags? And then lastly, if you can comment on your special occasion bags, there's one bag, I believe that is both in the outlet and in your full-priced stores, and then lastly, I, like Margaret--.

What was the third part of your question?

Yes, go ahead?

No, I'm sorry, I missed the third part about there's a bag in full-priced and factory?

Yes, your evening bag. And I was just curious. I, like Margaret, also was in the same store, and it seemed like you did move some pretty bags that looked very prominent, for example your metallic patchwork bag, I saw a number of those in that store, and it just makes the consumer kind of think, well, maybe I should be waiting and buying in the factory stores when you see them there, but maybe that consumer will see it once and never drive to an outlet store, so I saw the same thing she saw.

Let me take the last one first, Jennifer, because we do a lot of work trying to understand the behavior and psychology of our factory store consumers, and first, you're in a distinctive minority, Jennifer. There's only 20% crossover between a factory and full-priced consumers, but for the most part, we have a dedicated factory store consumer, and you need to also keep in mind, unlike most retailers, we do not mark down those bags in full price at the end of the season. Go into any other retailer in the United States, that bag will be marked down in the same location where they would have bought it at full price.

I totally understand that.

So there's no issue there. In terms of opportunities, whether it's bags with across-the-body straps and business bags, our opportunities are abundant, and any ideas that you might have, just sketch them and we would welcome them.

Well, I have lots of ideas there. And then lastly, I don't know if you're doing any metallic, I know you're doing metallic, that's not what I meant to ask your pat leather. Are you going to bring out pat leather again this season?

This season meaning next holiday?

No, this summer.

Actually, we don't really have a patent point of view scheduled to be in store in the back half of FY '06.

Okay. I was just kind of curious. And then I guess one last question. When you talked about the 15%, were you talking about the overall domestic market, and where were those figures taken from?

We were talking about the U.S. market, and they were developed empirically from the bottom up, where we looked at our reported sales from our individual department stores, our speciality stores, luxury goods, luxury good companies and so on.

Okay. Great. Well, good luck and thank you very much.

You're very welcome.

At this point, it's 9:35, the market is opened, and I will be speaking to most of the analysts throughout the day today. Unfortunately, we can't take any more questions at this time. Thanks everybody for participating and have a wonderful day.