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 Senior Vice President of Investor Relations and Corporate Communications at Coach, Ms. Andrea Shaw Resnick. You may begin.

Thank you. Good morning, and thank you all for joining us. With me today to discuss our quarterly results are Lew Frankfort, Coach's Chairman; and Mike Devine, Coach's CFO. 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 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. 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. Please note that the results for the fourth quarter and fiscal year ending July 2, 2011, included 13 and 52 weeks, respectively, while the same periods in fiscal 2010 included 14 and 53 weeks, respectively. All discussions of comparable store sales are calculated based on an equivalent number of weeks for each period, 13 weeks versus a comparable 13-week period for the fourth quarter and 52 weeks versus 52 weeks for the fiscal year. Now let me outline the speakers and topics for this conference call. Lew Frankfort will provide an overall summary of our fourth fiscal quarter and annual 2011 results and will also discuss our overarching strategy. Mike Devine will continue with details on financial and operational results of the quarter and the year. Following that, we will hold a question-and-answer session where we will be joined by Mike Tucci, President, North American Retail; Victor Luis, President, International Retail; and Jerry Stritzke, our President and Chief Operating Officer. This Q&A session will end shortly before 9:30 a.m. Lew will then conclude with some brief summary comments. I'd now like to introduce Lew Frankfort, Coach's Chairman and CEO.

Thanks, Andrea, and welcome, everyone. As noted in our release this morning, we were very pleased with our fourth quarter results, including excellent sales and earnings growth. This quarter's performance demonstrated a continuation of the momentum we have been experiencing throughout FY '11, as we continue to improve productivity while expanding our distribution in new and existing geographies. Our results reflect a growing recognition of the Coach brand globally and the success of our new initiatives. Before I review the highlights of the quarter, I wanted to mention our CFO transition. First, as you know, Mike Devine announced his retirement earlier this year effective later this month. This will be his last earnings call with Coach, and we will miss Mike greatly. Mike has played a critical role in developing and executing the strategies that have driven our superior sales and earnings growth during his tenure with the company. We wish him every success in the future. At the same time, we're pleased to welcome Jane Nielsen as our new CFO who will be officially starting in early September. Moving on with some key highlights of our quarter and fiscal year. Our performance in FY '11 was highlighted by increases of 18% in revenues, 20% in operating income and 30% in earnings per share, all on a comparable 52-week basis. It was a year of many milestones including, first, Coach surpassed $4 billion in sales, driven by gains in all of our business units. Second, we placed an increased emphasis on the globalization of our business, as we accelerated our international distribution growth, especially in Asia while we continued to open new stores and gain market share in North America. Third, we successfully refocused on the men's opportunity for Coach, as we began to open dedicated men's and dual gender…

Thank you, Lew. Lew has just taken you through the highlights and strategies. Let me now take you through some of the important financial details of our fourth quarter results. As mentioned, on a comparable non-GAAP basis, our quarterly revenues rose 17% with Direct-to-Consumer, which represents about 87% of our business, up 18%, and our indirect segment, up 12%. Similarly, operating income rose over 20%. Net income for the quarter increased 18% and totaled $202 million with earnings per diluted share of $0.68, up 22%. On a reported basis, sales rose 9%. Net income rose 4%, and earnings per share gained 7%. For the fiscal year, sales rose 18% on a comparable non-GAAP basis, totaling $4.16 billion, while earnings per share were $2.92, up 30%, and net income was $881 million, up 24%. On a reported basis for the full year, sales rose 15%, net income gained 20%, and earnings per share increased 26% from fiscal 2010. For the quarter, operating income totaled $312 million, up 20% from the prior year on a comparable non-GAAP basis and 5% above the $297 million reported in the year-ago period. Operating margin was 30.3%, 80 basis points better than the 29.5% generated in the prior year on a comparable basis and versus 31.2% on a reported basis. During the quarter, gross profit rose 6% to $740 million from $697 million reported a year ago, while gross margin rate was 71.8% versus 73.3%, reflecting the impact of higher sourcing costs, partially offset by channel mix and modestly lower levels of promotional activity in our North American factory business. SG&A expenses as a percentage of net sales totaled 41.5% compared to the 42.1% reported in the year-ago quarter. We were pleased that we were able to gain 60 basis points of leverage on a reported…

Thank you, Mike D.

[Operator Instructions] Our first question comes from Bob Drbul with Barclays Capital.

I guess the first question that I have is on the comp results for this quarter, what really drove the upside to your plans? And do you think those drivers should remain intact for potential for upside in your plans for the next fiscal year?

Mike Tucci will take that.

Sure. We had -- we're very pleased with the quarter. We're very pleased with the year. The drivers behind it, conversion’s significant, more importantly behind conversion, improved handbag productivity through pricing where we had average unit retail increases as well as unit comps. That was a significant driver, and I think it speaks to the longer-term rebalancing of the assortment and driving a focus on balance in our assortment in handbags. Additionally, we're starting to see men's become a comp driver, contributing to overall productivity in our stores, particularly in the significant high profile stores where we have men’s in a more definitive and larger format within those stores. As you well know, we tend to be conservative planners. And while it's early in the quarter in Q1, the trends and tempo of the business that we saw coming out of Q4, we really see that continuing in the early stages of July. We like what we see happening with the response to product, largely driven by Chelsea, a very strong response to what I would call a more a refined look within Poppy and continued reaction to newness in our factory channel where we continue to refine our flow strategies there. And I think the other important channel to mention is that our digital opportunity continues to be a growth driver for us, not only from a sales and revenue standpoint, but in terms of visitation and browse. And we know that a large reason for our consumers coming to our site is to pre-shop our stores, so we see that as a continued opportunity as we enter into Q1.

Great, and just one follow-up question is, I think, Lew, you mentioned strong gains on a comp basis in both full price and factory. Was there a variance between the 2 this quarter?

It was roughly the same.

Our next question comes from Omar Saad with ISI Group.

Quick question on your international wholesale business. It sounds like there's some -- a little bit of acceleration in the store growth plan for this year, especially in light that a couple more of those businesses are now in-house. Could you kind of put that in context, what's going on there, especially with the announcement today on Brazil and in Vietnam?

I mentioned earlier that our growing awareness globally has created substantial opportunities for us. And so first, in existing markets, we're finding that we're gaining on higher awareness, increased traction, which gives us confidence that we can continue to open new locations. We're also benefiting in many markets from the global tourist who is contributing substantially to our sales in many locations. Due to the new distribution agreements and increased traction, we're in a position to open many more locations than we have had -- than we have opened in the past.

And how will the sourcing work in Brazil? I know there are sometimes some tariff issues for imports. Is your partner there going to source locally?

We're going to be -- consistent with the way we run our business, we're going to do outsourcing [ph]. We're going to deal with the tariffs as we need to. The assortment will be a global assortment.

Okay, great. And then one quick question on men's. Could you remind us what it was historically at its peak in terms of a percent of total Coach sales? And do you think it could get back there someday?

I'm sorry, men's...

20% to 25% of our sales as recently as the late 90s, Omar.

It's conceivable that we could. I mean, right now, we're looking to grow our business from about 4% to over 10% during our planning horizon.

[Operator Instructions] Our next question is from Kimberly Greenberger, Morgan Stanley.

I wonder if you could talk about your pricing and your mix strategies in North America. And are you planning to increase price in order to offset rising cost of goods sold? And then Mike, could you just help me a little bit on your gross margin outlook? Can I read your comments to mean that you're expecting flat gross margin in 2012? Or do you think there's a possibility you could see some recovery in the year, obviously, with the improvement in the second half of the fiscal year?

Why don't I take the latter half of that first, and then, perhaps Mike or Lew could jump in on the first part of the question? But Kimberly, we're -- yes, what we're asking people to model is essentially a flat gross margin rate. At this point in the year, it's still very early days of the year, but we're actually feeling guardedly optimistic about gross margin. We do believe that the quarter just reported is likely the low point. And we feel that we can continue to deliver margin rates similar to '10 and '11 for FY '12 with some gradual upside improvement in the out years, and that's in spite of continued sourcing pressures, the most worrisome of which is wage inflation in China. As we've talked about, we're at the beginning of a very aggressive program to move 50% of our units produced out of China. And while it's early days, we're ahead of schedule on this one, and we'll continue to battle it as we're now actually hearing some rumblings of wage inflation elsewhere. But in terms of materials, our design, merchandising and sourcing teams have done just a remarkable job in designing into cost and counter-sourcing. And of course, our cost of materials are not as dramatically impacted as some of the apparel brands you might be following. And we do feel like as we move into the second half of the year, we'll be anniversary-ing the worst of the material cost inflation. Really, all the other dynamics of the business will be helpful to gross margin as we move forward, most notably, channel mix, as our full price businesses in our mature markets continue to trend positive. And notably, China grows far more quickly than total Coach. Also the conversion of these distributor businesses, namely Singapore thus far, with Malaysia on horizon will also be helpful to gross margin rate. And I think, ultimately, long term as men's shares increases, we can also drive gross margin rate longer-term, as our relatively new men's team gets their legs under them. And frankly, we believe that our male consumers are not as bargain-obsessed as their wives and girlfriends. So the last thing I think that can be helpful to gross margin rate is as the overall economy generally improves, I think we'll continue to see full price trending nicely and perhaps over time have a little bit of pricing power in the factory channel as well. So we're looking for -- to model relatively flat FY '12 as the year plays out. The wildcard will be the promotional levels probably in factory, but there is gradual improvement in upside into the out years.

Okay, on retail pricing, the answer is we absolutely see opportunity for pricing, and it's not absolute price increases. It's driven by mix and offer. Couple of things that are happening in the market that are favorable to us. One is we're in a strong leather cycle, which affords us the ability to get higher retails, and that will drive average unit retails up in our handbag category, had an impact on Q4 where you see average handbags over $400 contributing 17% to our overall handbag sales versus '11 in the prior year. That's a big deal. The refinement of the Poppy strategy allows us to work the mix with inside of Poppy for some potential retail upside. And one other significant opportunity is what we're calling small bags and cross body, which offers us a pricing opportunity and also protects our opening price points both within Poppy, as well as in the overall mix. That's a very important element. So while we dialed back to a target of $300 and landed in the $280 range a couple of years back, we're now working our way back in trying to capture that $20 of upside in average unit retail in handbags. And I think overtime, we see that as a real opportunity. On the factory side, it's a similar story with a strong leather trend and also being very creative there on our pricing strategy to create differentiation in our retail strategy between leather offer and signature offer which the customer accepts on the factory side and allows us to gain average unit retail increases in our handbag category. That was also helpful and a driver, and we see that continuing.

And a driver of gross margin rate as well, particularly in factory.

I'd like to just add one clarification, Mike D. When we talk about 50% of our units coming from outside of China, what we're really referring to was incremental production requirements. We plan to maintain the same level of jobs in China that we have today, but all of our future requirements we're planning to come from outside of China.

Our next question comes from Brian Tunick with JPMorgan Chase. Brian Tunick - JP Morgan Chase & Co: I guess my question's on the SG&A side. Just maybe talk about the investment spending this past year on RK in Europe and the continuation of the design buildout. How much of a drag was that this past year? And how should we think about that going forward in FY '12? Can this business get back to that 38% SG&A, as a percentage of sales, especially if you guys get to that $5 billion in revenue target over the next couple of years? And just quickly, on the Hong Kong listing, is there any update on timing of what we should we be looking for and your time -- your thoughts on that?

I'll take the simpler one, the Hong Kong listing first, although actually it's not simple. It’s proving to be complex. And we're currently going back and forth with the exchange answering some questions based on the documents we've submitted, required to get listed. I think we're looking probably for a listing sometime in the early fall. But going back to SG&A, we were very pleased actually in the fourth quarter and the way we just delivered, as we talked about, we delivered, on an as reported basis, 60 basis points of leverage to the SG&A line, and we did that in spite of losing some of our healthiest revenue from Japan as a result of the earthquake. And again, that's on the 14 versus 13-week compare. So we're continuing to see great leverage being delivered by our mature businesses here in North America and in Japan while we continue the investment spend. So we talked about that investment spending as it was directed for RK, the infrastructure build in China and in other parts of Asia to allow us to capitalize on the opportunity there as being an investment in the neighborhood of about $0.08 this most recent year. I think we can look to see that investment continue to improve into '12 and into the out years. Valérie Hermann has come in and is really doing, I think, a number of the right things around RK. We're likely to pick up a couple of pennies of investment spend there. What will happen is that in the first half of the fiscal year, we will pick up the Singapore direct expenses. And while relatively modest to total Coach, that will be a drag to the SG&A rate. It will take Victor Luis and his team a little bit of time to bring that business to its full profit potential. We will get there, but to get there quickly, it takes a while for us to install our retail processes, adjust the assortment. And remember, when we transition a business from the distributor to a direct business, we're buying that inventory back at wholesale prices. So the first 6 months of selling is also at somewhat reduced gross margin rates. But going forward into FY '12, the balance of all these investments and the leverage we expect to get from our mature businesses looks like we're going to have a pretty flat SG&A rate for the year while we grow the business very strong double-digit top line.

Our next question comes from Lorraine Hutchinson, Bank of America.

Just wanted to follow up on the men's business. And how are you thinking about the total store base for both factory and full price domestically and then in Asia?

Mike T?

We’re a little further along on the factory side only because it's more demonstrated there. We do have 15 stores opened. We opened a handful of stores this past several weeks, so we're adding to that. The factory opportunity from a store count standpoint is significant. And while we're not committing to a long-range number, we will be nimble and aggressive in terms of taking opportunities in the marketplace to gain space on the factory side. On the full price side, we're really pleased with what we see happening in the couple of stores that we have open outside of Bleecker Street, and we’ve committed to a handful of stores this year that we're working on, including a format where we have men's and women's side-by-side with a pass-through that will open in the spring in Pentagon Center Mall outside of D.C. That's when we talk dual gender. That's the format that we want to get into the marketplace. It's a format that we're seeing a lot of success with internationally, and we think that opportunity may play itself out in North America as well. I think it's important to note on the full price side that men's is a more premium proposition for us, and we're going to target the absolute best real estate within the full price arena. As we get more experience, we'll be better informed, and we'll approach the men's full price opportunity accordingly.

Victor, would you touch on Asia for us, please?

Sure. First, from the size of opportunity perspective, I think it's important to understand the scale of the opportunity that stands in front of us. We're looking at a premium handbag and accessories market in Asia of about $12 billion today, of which approximately 25% is men's. That would be the approximate penetration in Japan and in P.R.C., in Mainland, China, we see the penetration of men's closer to 50%, so a truly tremendous opportunity for us. From a distribution perspective, of course, you're all aware that we have a more mature distribution in Japan. And as Lew mentioned in the speakers’ notes, today, we have already 7 locations in Japan, 3 full price locations and 4 factory locations. We're planning to open 15 doors in FY '12, the vast majority of which will be men's freestanding locations. Increasingly, we're also experimenting with bringing men's into current women's doors where it makes sense from a distribution perspective. This is slightly more difficult in Japan, given that most of our locations are in department stores, where often we're on the women's handbag floor. In China, the opportunity is truly boundless, as we like to say. We have, today, 53 locations in the Mainland combined with 13 in Hong Kong and Macau, as you know. Of those 53 locations in the Mainland, already 23 of those are those dual gender locations that Mike referred to earlier. And of the 30 locations that we’ve plan to open in FY '12, approximately 27 of those will also be dual gender locations, so it is very much at the center of our strategy. We have the opportunity to go boldly there, given that, of course, we are building distribution from scratch. Across other Asian markets, we are looking at both strategies as we are in Japan and here in the U.S. where we have the opportunity to start with new doors and it works, we're going in with the dual gender location, and where not, we're going in with the men's standalone locations.

[Operator Instructions] Our next question comes from Dana Telsey, Telsey Advisory Group.

I wanted to -- a couple of things, how much production are you planning to shift out of China in this upcoming year? And if you think about the outlook [ph] business and the returns, what was the penetration of the main 4 products this quarter versus last year, and how you see those margins?

The first question, in terms of -- over 85% of our production will be coming out of China this year. And if I understood your question correctly, Mike, in terms of made for factory?

About 85%. [indiscernible] was where we've been.

And to close out on that, yes, Dana, that does carry a slightly higher margin than the full price transfers into the channel.

Great, and any thoughts on any remodels for the full line stores for this year with CapEx dollars?

We are -- there are a couple of things happening. One is we're actually in the process of taking a look at the entire fleet on a full price side and, in particular, looking at potential locations where we either have lease opportunity or space opportunity to better position men's and renovate the stores at the same time. And an example I would give you, a couple of examples locally, one would be we're about to reopen our store at 342 Madison where we were able to reformat the space and add a men's point of view and shop in that space. We did a very significant project at 595 Madison. So we have at least allocated slightly more capital to the idea of renovation and remodels within North America, particularly around taking advantage of the men's opportunity.

Thank you all for joining us on our conference call today. That will be our last question. I'd like to turn it back now to Lew for a few closing words. Lew?

I think our results and our comments speak for themselves. We're off to a great start in fiscal '12, and we believe we have the strategies in place to continue to grow at double digits with the bottom line growing faster than the top line. And as I've said many times before, stay tuned. Thank you, and have a good day.

Thank you, and this does conclude the Coach Earnings Conference. We thank you for your participation. You may now disconnect your lines.