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.

Thanks you. Good morning and thank you for joining us. With me today to discuss our quarterly and fiscal year end results are Lew Frankfort, Coach's Chairman and CEO, Victor Luis, Coach’s President and Chief Commercial Officer and Jane Nielsen, --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 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 these risk factors. Also, please note that historical growth trends may not be indicative of future growth. Now, let me outline the speakers and topics for this conference call. Lew Frankfort and Victor Luis will provide C results and will also discuss our overarching strategy. Jane Nielsen will continue with details on financial and operational results for the quarter and in the year along with our outlook for FY 14. Following that, we will hold a question-and-answer session. This Q&A session will end shortly before 09.30 am. Lew will then conclude with some brief summary of comments. I'd now like to introduce Lew Frankfort, Coach's Chairman and CEO.

Thanks Andrea and welcome everyone. We shared a lot of news in our press release this morning and we understand that it will take some time to digest. This year has obviously been unique and we have recognized all that is -- that’s not been business as usual. Most importantly, we have taken significant steps to help reposition the company to return to superior growth rates while maintaining outstanding profitability levels. Our focus and priority is on the brand and driving its relevance to reinforce our customer’s emotional connection to Coach notably in North America. We have a proven group of Coach Leaders to execute our transformation strategy. This is a multiyear journey and we’re excited about the future, building upon our strong brand and business equities with an exceptional team at the helm. I also want to take this opportunity to thank Mike and Jerry for their important contributions in building Coach into a leading international accessories brand. The entire Coach team has great admiration and respect for their significant accomplishments and we wish them the best. And now to our results and outlook. During the fourth quarter we approached double digit growth in constant currency and continued to gain overall traction on our key strategies supporting our transformation. We generated strong international results, leveraged the men’s opportunity globally, strengthened our digital capabilities and drove excellent results in the re-launch of footwear. While we maintained our outstanding profitability levels, we were not satisfied with our performance in the women’s handbag and accessories category in North America. Moving on to some key highlights of our quarter and fiscal year. Our performance in FY’13 was highlighted by increases of 7% in revenues, a 2% rise in operating income and 6% in earnings per share. It was a year of many milestones.…

Thanks, Lew. Starting with international, which today represents about a third of Coach's business, sales rose 7% in the fourth quarter or 17% on the constant currency basis, consistent with prior quarter and full year trends. During the quarter, China sales rose about 35% from prior year, fueled by distribution and double-digit same-store sales. As Lew noted upfront, this took our full year sales to over $430 million, up 40%. Clearly, the Chinese consumer continues to embrace Coach, as repurchase intent has remained high at over 80% among existing consumers. This is also evident by the increasing contribution of the Chinese tourist to our global sales. Our other Asia direct businesses outside of Japan and China, Korea, Taiwan Malaysia and Singapore also posted strong aggregate growth in the quarter and the year. In total, they benefited from the retail step up from the prior year from Malaysia and Korea, which were acquired in early FY ’13. It’s important to note that their combined POS sales also rose at a high single-digit rate for the quarter and a double-digit rate for the year. As noted, for the quarter, we posted a 4% increase in local currency in Japan despite the top compare, while dollar sales declined 15% reflecting the weaker Yen. Similarly, for the year, sales were essentially even with prior year on a constant currency basis and down 9% in dollars. Moving on to product, Legacy and Madison remained our key collections in the fourth quarter with new silhouettes and on trend colors introduced throughout the period. The Madison Phoebe Shoulder Bag launched at the end of the March in North America and later globally was particularly successful. We also featured a new group of Satchels and Totes across multiple collections in June. Looking forward, we’re excited about the re-launch…

Thanks, Victor. Lew and Victor have just taken you through the highlights and strategies. Let me now take you through some of the important financial details of our fourth quarter and fiscal year results. Our quarterly revenues increased 6% with North America up 6% and International up 7%. As noted, on a constant currency basis, revenues rose 9% overall, international sales up 17%. For the fiscal year, sales rose 7% totaling $5.08 billion with North America up 5% and International up 10%. On a constant currency basis, total sales rose 8% for the year with International sales up 15%. Excluding unusual items, net income for the quarter totaled $254 million, up 1% with earnings per diluted share of $0.89, up 3%. This compared to net income of $251 million and earnings per diluted share of $0.86 in the prior year's fourth quarter. For the quarter, operating income totaled $371 million essentially even with the year ago period on a non-GAAP basis while operating margin was 30.3% versus 32.1%. During the quarter, gross profit rose 6% to $892 million from $838 million reported a year ago, while gross margin was 73%, an increase of 40 basis points versus year ago primarily due to sourcing cost improvements. SG&A expenses, as a percentage of net sales, totaled 42.6% compared to the 40.5% reported in the year-ago quarter. For the full year FY '13, operating income totaled $1.58 billion on a non-GAAP basis, 2% above the $1.55 billion reported in the year-ago period. Also on a non-GAAP basis, operating margin was 31.1% versus 32.6% last year. During the year, gross profit rose 7% to $3.7 billion from $3.47 billion a year ago. The gross margin rate was 73%, up 20 basis points versus a year ago and in line with our guidance. SG&A expense…

Thank you. (Operator Instructions) Your first question today is from Bob Drbul with Barclays.

Hi. Good morning.

Good morning.

I guess, Victor, I have a question for you. In terms of all of the management appointment and some of the departures this morning, is the team now complete? Are there any other major hirings that you think you need to do, how should we think about it from that perspective?

Thanks Bob. I would say that certainly the majority of the team is complete, and you have heard this morning, it really is leveraging the very deep bench that we have. We are at the moment looking for and recruiting for a replacement for Jerry as COO and that is a major appointment outstanding.

Okay. And then, I just have one follow-up question and it is, can you talk a little bit about the capital allocation, I mean, Jane, and whether the company would consider an acquisition at this point to drive growth?

Sure, Bob. As I just said, our long-term and long-standing commitment is to growth and creating shareholder value. We’ve got a strong balance sheet and a great cash flow in our business, but our priorities for cash are first and foremost to invest in the growth of our business. Our strong ROIC and discipline in deploying capital creates significant value for our shareholders. I would say, secondly, we are open on a selective and opportunistic basis to making value creating acquisitions that would build platforms for long-term growth. We’d be open to a deal that would create leverage for our global infrastructure, our organization capabilities, and our operating strength. And then, finally, as always, we’re committed to returning capital to shareholders through both dividends and share repurchases. As we -- as I just mentioned, we’d expect our dividend to grow at least in line with net income growth, and we’ll execute share repurchases opportunistically this year expecting to return to that $700 million level where we’ve been for the last three years or so.

Thank you.

Thank you. Our next question is from Ike Boruchow with Sterne Agee.

Hello, you guys there?

Yeah. Please go ahead.

Sorry about that. Thank you for taking my question. I guess my question is about the store streamlining -- the full-price store streamlining in the U.S., the sixteen doors you plan to close in North America this year. Are any of those doors losing money or is there anything specific about those locations, and maybe could you comment on the margin implications there as well as you streamline that part of the business?

Okay, well the first, calling [stocks] (ph) from our fleet is routine, because populations might make people move. The second -- each of the stores that we selected are stores in catchment areas as where another Coach store is in immediate proximity, and these stores are – were at the bottom of our performance hurdle with only modest four wall contribution.

Yes, I just have one another comment on that. The stores that we closed were at the end of their lease, and so we chose opportunistically to close those stores at the end of a lease action.

It’s okay, great, and then a quick follow-up on -- could you maybe comment a little more on the wholesale opportunity that you mentioned here in North America, maybe how many doors -- how many US stores are you currently in, how many shop transformations have you identified, and maybe could you size that opportunity?

Well, first for context, we are in about 1000 locations, and there are a substantial additional number of locations that we think are appropriate for Coach where our consumers shop. We’re contemplating opening about 100 additional locations this year. In terms of our wholesale business overall, it’s a very sharp focus for us, and we are looking to open about 20 shops or rather I should say where we’re renovating about 20 shops before the holiday and another 30 after Christmas. Beyond that, we’re moving to open case line where we have about, I believe about 20 locations today with open case line, and we’re moving to about 300 locations in open case line. We’re excited about the appointment of Jason Bunch, as noted. He has spearheaded the re-launch of our footwear, proven merchant, and very versatile up in that channel. So, overall we’re very enthusiastic, so when we talk about our case line, we’re moving to actually open sell from case line to be more precise.

Okay, great. Good luck.

Thank you.

Thank you. Due to the number of questions in the queue, we do ask that you limit your request to one question per request. The next question is from Oliver Chen with Citigroup.

Hi, guys. Thanks. Regarding your plans and your stated plans to intensify North America and your performance in women’s handbags, could you just articulate your average unit retail strategy and where you feel comfortable with the price points in the future versus currently, and how that portfolio may evolve in terms of how that may impact overall AUR there, thanks?

Sure, first for a context, when we talk about our women’s handbag and accessories business in North America, it should be noted that we’ve been challenged in the global portion of our business only. Our leather business is extremely healthy and robust. And as we move into this fiscal year as Victor mentioned both on the factory side and on the full price side, we’re focusing primarily on leather-based collections and CAPSULE is also going to provide us with an additional group of what we would call aspirational and more sophisticated products. Overall, our [AGT] is expected to be about the same, and the average handbag we’re looking to be slightly up in the neighborhood of $300, that’s somewhat higher.

Thank you. Good luck.

Thank you.

Thank you. The next question is from David Schick with Stifel. Mr. Schick, please check your mute button.

Hi. Good morning. Thank you.

Good morning, David.

I just wrapped up with the mute button on. Could you talk about the online trends both the business you’re seeing, any engagement -- any engagement stats that you’d care to share before and since the re-platforming that you’ve done? Thank you.

Sure. Actually, we are just beginning our second month, so everything we say is based on pretty much the last 30 days, and we’re pleased with the improvements. We made changes in a variety of areas; first, we have moved to horizontal navigation. But we have elevated photography which does include on-figure handbag shops, stronger product pages, and the alike, and what we’re finding is an overall increase in demand. We do have a reduced bounce rate and improve conversion rate. And we are also finding that a greater portion of people are engaging with mobile and tablets just because it’s easier to navigate. So net-net, we’re very pleased, and as you know today that the digital world is more in a constant evolution.

Thank you. Our next question is from Barbara Wyckoff with CLSA.

Hi, everybody. Could you talk about -- actually on the digital subject, your digital efforts outside the United States and then elaborate a little bit on the travel retail opportunity? And then lastly, just could talk about the performance of footwear in stores that had product both in North America and Asia?

Sure. How are you, Barbara? Thank you for your continued interest in our international business as we can always count on you. In terms of, first, I’ll start with your last section which is footwear. We have been very pleased with the initial rollout this past quarter here in North America, whereas I mentioned in our speakers’ notes, we’re seeing penetration really from the start of the launch at 12% compared to 7% last year. Some great news in further – a little bit more texture is that we’ve seen the AUR increase 20% year-over-year as we’ve move to much more of a fashion-based collection from traditional sneaker and moccasin-based business that we were in the past. So that points to really promising news moving forward. In addition, internationally, really the launch is taking place in the month of September as we’ve been gearing up with the international last, and so we’re really excited about that, some initial tests in Japan and in China in very select doors points to also very promising direction there, so we’re very excited. In terms of digital internationally; we have, as we’ve discussed in the past, a pretty robust business in Japan and that is one of our leading doors as it is here in North America, and we’re really leveraging a lot of the learnings that our North American digital team has been taking into the channel here and leveraging them in Japan quite effectively. As you know in China, very young business, we’re just about to comp our first year, and there we are very excited because we are seeing distribution, whereas today we have doors in 47 cities, we’re seeing distribution in I believe now over 110 cities. It is giving us very good indication of the opportunities outside of locations…

Well, okay great thank you.

Next question is from Brian Tunick of JPMorgan.

Thanks and good morning.

Good morning Brian.

Guys, just hoping we could tie back the negative comp guidance for the upcoming year with some of the comments you guys have been making about the enthusiasm around the product launches, you know the impact of comp on men’s and footwear, the increased marketing spend, so just hoping you guys could talk about what kind of comp maybe difference that you saw between the factory channel and full price, and are you expecting both channels to be negative low singles in the upcoming year, thanks very much.

Well first, Brian as you know, we do not disaggregate comps. We can tell you that the trends are similar in terms of improved conversion in both channels on (inaudible). The reality is that, we do see this as a multi-year journey, and while we’re very sensitive as to quarter-to-quarter trend, we’re taking the point of view that until we actually experience traction within our stores, we’re not going to forecast it and that’s our tradition. Anything else, Brian?

Thank you, the next question is from Liz Dunn with Macquarie.

Hi, thanks for taking my question. My question relates to sort of the North American stores plans, what is the optimal footprint that includes footwear, like how much square footage do you have to add to the stores and what else might your plans entail in moving from kind of what I think of as sort of pristine box, it’s very efficient at selling handbags to something that maybe drives the customer in a bit more, and keeps her engaged in the store and in the lifestyle? Thanks.

Well first, fortunately when we’re moving to a system where we will no longer need cash wraps, so we’re going to be able to eliminate cash wrap stations and use that additional space for productivity. And in terms of driving productivity in our stores, our overall footprint is adequate. What’s critical is for us to create more surprise, more moments, and more unexpected, and you are going to see as we move forward in which we’ve already begun within our stores a merchandising configuration that does encourage exploration, and we’ll tell a much more complete story on that, we believe, it’s going to resonate very well with consumers.

Thank you all for joining us today on our conference call. As Jane noted, I’d now like to turn it back to the team for a few closing words.

First, let me begin by saying that we’ve been doing this for a long time. We have a strong and seasoned management team and a strong bench. I know some of you are concerned. We do expect this to be a seamless transition, and we’re committed to delivering strong top and bottom line growth over our planning horizon. We have a great grand, we have excellent business equities, and we have an exceptional group of people working at Coach. So, as I’ve said before, stay tuned and have a good day everybody.

Thank you.

Thank you. This does conclude the Coach Earnings Conference. We thank you for your participation.