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.

Good morning and thank you for joining us. With me today to discuss our quarterly results are Victor Luis, Coach’s CEO, and Jane Nielsen, Coach’s CFO. Francine Della Badia, president of North America retail is also 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 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. Now let me outline the speakers and topics for this conference call. Victor Luis will provide an overall summary of our second fiscal quarter 2014 results and will also discuss our progress on global initiatives. Francine Della Badia will discuss our business in North America in more detail. Jane Nielsen will conclude with details on financial and operational highlights for the quarter. Following that, we will hold a question and answer session where we will be joined by Lew Frankfort, Coach’s executive chairman. This Q&A session will end shortly before 9:30 a.m. Victor will then conclude with some brief summary remarks. I’d now like to introduce Victor Luis, Coach’s CEO.

Good morning. Thanks, Andrea, and welcome everyone. As we enter the new calendar year, I couldn’t be more excited to be greeting you today as CEO of Coach, succeeding our executive chairman, Lew Frankfort. It is an honor to have the opportunity to build on Lew’s remarkable 35-year legacy and to lead the best team in specialty luxury retailing. We are at a truly unique moment in time. We are faced with a new competitive landscape, evolving consumers, and changing shopping patterns, receiving the opportunity to define modern luxury by innovation, emotion, and relevance into the Coach brand. Change and the sense of urgency are not new to our history. Many of you know that we talk about Coach’s history in chapters. In our first chapter, Coach defined luxury leather goods for the American consumer. In our second chapter, we created the accessible luxury handbag and accessories category in North America and key Asian markets. And now, I, together with Stuart Vevers, our new executive creative director, and our seasoned Coach team, are excited to write Coach’s third chapter, our transformation into a global lifestyle brand anchored in accessories. We will accomplish this by focusing on our key brand equities of authenticity, quality, craftsmanship, and value. As noted in our press release, during the holiday quarter, total sales fell slightly in constant currency as weakness in our North American women’s bags and accessories business offset strong growth in men’s footwear and robust sales in emerging Asian markets and Europe. We continue to be disappointed by our performance in North America, which was impacted substantially by lower traffic in our stores and by our decision to limit access to our e-factory flash sale site. At the same time, China results remained resilient, with total sales growing about 25% and comparable store…

Thanks, Victor, and good morning. As Victor mentioned, we continue to feel pressure in our North America business, in traffic in our retail stores, impacting women’s handbags and accessories. Simply put, we were dissatisfied with our performance in these categories. As I did last quarter, I’m going to give some underlying texture to the comp performance, both in our successful and strong product initiatives which are resonating with consumers, and where we see the opportunities to strengthen our product [unintelligible] in North America. As was the case industry wide, in-store traffic decelerated further from Q1 levels as the national retail traffic index posted the steepest holiday season decline in at least six years. Similarly, in factory malls, which are primarily open air, in traffic, notably in the two weeks leading up to Christmas, we did not experience the build that we expected. On these lower levels of foot traffic throughout our store base, overall conversion rose and transaction size held. While in previous quarters and years we were able to offset slowing in store traffic on the internet, our online business did not contribute positively to our overall North America comps. Our year over year comparisons were impacted by our strategic, brand health decisions to both eliminate third-party flash events as well as limit the access and invitations to our factory flash site. Excluding these factors, our internet comp would have experienced moderate growth. What we have found, as was alluded to earlier, is that when we do offer fashion innovation our customers do respond. As Victor mentioned, the story this quarter was the introduction of capsule. All of our full price stores in North America received the new capsule handbag silhouette, the Borough, in two sizes and three colors. A tiered offering of more fashion handbags in additional colors…

Thanks, Fran. Our strategic focus remains on the four pillars of growth that we have previously shared. First, and most broadly, growing our business in North America and throughout the world by transforming into a global lifestyle brand anchored in accessories. Second, leveraging the global opportunity by aggressively growing our international businesses. Third, tapping into the large and growing men’s accessory category, which we’ve already touched on. And fourth, harnessing the growing power of the digital world to both drive ecommerce and customer engagement globally. While focusing on productivity, we will selectively continue to expand our distribution. As our annual plans haven’t changed materially from what we shared in July and in October, I will be brief. We still expect that our square footage globally and across all channels will increase around 9% in FY14, consistent with prior guidance. In North America, our directly operated square footage will be up about 7%, driven by about 15 new store openings focused on Factory, about 20 expands within the context of our transformation and 15-20 previously announced full price closures. In China, as we discussed, we’re on schedule to open about 30 net new dual gender locations, increasing our square footage by about 25%. And as noted in our press release, our sales remain on track to reach $530 million this year, driven by both distribution and double digit comparable location sales. While we expect to open a few stores in our other direct Asia markets of Korea, Taiwan, Malaysia, and Singapore, our primary focus remains productivity. We have been realizing the benefits of Coach’s direct management in these markets and are pleased with the development of both our teams and our brands. In Japan, we expect net square footage growth will increase slightly with the opening of about 5 to 10 net new locations, most of them dedicated men’s stores. And in Europe, including the U.K., for FY14 we still expect to open about 10 retail locations focused on key European cities, and now plan to open about 30 total wholesale locations. As you know, we also have significant and growing distributor run businesses in other countries. Our primary areas of focus are first, other Asia Pacific markets, including Australia, Indonesia, Thailand, Vietnam, and the Philippines; second, Latin America, including Mexico, Brazil, Colombia, Venezuela, Panama, Peru, Chile, and Argentina; and third, in the Middle East. I just reviewed our transformation progress, ongoing strategy to reinvigorate growth while taking steps to improve productivity in North America. Importantly, we are confident in our vision and we have the right team and resources to execute our transformation already underway. At this time, I will turn it over to Jane Nielsen, our CFO, for further details on our financials. Jane?

Thanks, Victor. Victor and Fran 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. Our quarterly revenues decreased 6%, with North America declining 9% and international increasing 2% in dollars. As noted, on a constant currency basis, revenues were down 3% overall while international sales rose 11%. Net income for the quarter totaled $297 million, with earnings per diluted share of $1.06. This compared to net income of $353 million and earnings per share of $1.23 in the prior year second quarter. Our operating income totaled $436 million, as compared to the $527 million reported last year, while operating margin was 30.7% versus 35%. During this quarter, gross profit totaled $983 million, versus the $1.09 billion a year ago. Gross margin was 69.2% versus 72.2% for the prior year. Our expense ratio in Q2 totaled 38.5% compared to 37.2% reported in the year ago quarter. Our SG&A dollars actually declined slightly on a year over year basis as we managed variable cost to the lower sales levels, adjusted our outlook for lower performance-based compensation levels, and benefited from the weaker yen. We also realized the benefit of our fourth quarter restructuring actions and the sale of RK, which were offset by higher spending on Coach brand marketing as well as the impact of taking Coach Europe in house. Inventories at the end of the quarter were $553 million, 12% above the $494 million reported at the end of last year’s Q2. As mentioned on our last call, we’ve planned for inventory levels to be up over the balance of this fiscal year, based on several key factors, including distribution growth, the acquisition of Coach Europe, higher average unit cost, and our expansion into…

[Operator instructions.] The first question today is from Ike Boruchow with Sterne Agee.

Victor, I wanted to ask about some of the initial steps you’ve taken in this transformation, both from a product perspective. It sounds like the Borough Bag has been a hit, and the lifestyle stores look great. But both have been done on such a small scale, so I guess the question is why wouldn’t you be a little more aggressive from both a product and stores perspective on some of these changes that do appear to be working. And then a quick follow up would be, internally, what gives you the confidence that Stuart’s product will work, and that the brand is still healthy?

Let me start with the second part of your question, which really is about confidence around the brand. I not only have the pleasure of leading the best team in luxury specialty retail, but also without a doubt the leader in the space from a brand perspective. We are the original U.S. luxury brand. We are the most authentic brand, and certainly any piece of research that we see today, and which I know many of you also do, shows us as the most loved brand in the space. Of course, the environment around this has shifted. Consumer shopping behaviors are changing, there’s a new competitive environment. We realize that. We’re grasping that opportunity through our transformation, and are very cognizant of the need for us to tell a richer story to our consumers and provide a richer context, which is what we’re doing through our strategies and through transformation. And with Stuart Vevers as our creative director, we’ve undertaken that journey. He’s been with us for four months, and just yesterday, internally, we showed the first collection. And I can tell you that the energy among the team was palpable. We are extremely excited by the initial steps we’re taking. Stuart is providing us with a rich context for us, not only in terms of rediscovering what is great about Coach, which is a story on quality, great purity of design, understanding materials and craftsmanship, but also providing a fashion relevance for the brand like we’ve never had. So we’re incredibly excited about that. In a minute, I’ll ask Lew to give you his opinion as well, because obviously, having been on the journey for 35 years, he can certainly compare with past years. In terms of the Borough and the stores, we want to be of course learning on everything that is happening. The Borough was developed by our team 12 months ago. And we made the initial buys, we’ve gone back in. You’re going to see increasing presence of that specific silhouette across the fleet in North America and globally. In fact, from this floor set, if you would have visited stores today, relative to holiday, you’ll see an increased presence there. And in terms of the fleet rollout of the new concept, the lifestyle concept that I know many of you have visited at Lower Fifth and perhaps at South Coast Plaza, as Fran touched on, the feedback from consumers and just our staff and their interaction with them has been very positive. So we’re learning, we’re tweaking obvious fixture programs and the like, and over the next weeks and months, we’ll be making decisions on how expensively we roll that out based on the feedback. Lew, perhaps you want to give your comments on what you’ve seen in relation to Stuart’s first development?

Sure. Good morning everybody. Just for some context, our brand grew organically from our product. Before we had a great brand, we had a great product. And the attributes of the product, as Victor mentioned, authenticity, craftsmanship, quality, and value, were the cornerstones of our products, and eventually became key brand equities. Today, when we look at the product that we’re going to be launching in our first ever presentation next month, launching in September, it still has been absolutely true to our underlying brand equities. The product is rich, it’s elevated, it’s original. He has interpreted and brought forward the many codes that consumers have come to know and embrace from Coach. And in closing, the product is imbued with emotion. It resonates with quality, and is quite appealing.

The next question is from Oliver Chen with Citigroup.

Regarding the factory channel and the promotional nature of what’s happening there, could you highlight a potential catalyst for abatement there, and what you’re seeing competitive within the marketplace? And just as a follow up, to help us set expectations for your business going forward, how do we think about timing for a better comp store sales? And what should we prioritize as the key drivers for that happening?

I’ll start with your factory question. In terms of factory stores, as we mentioned, we had a strong Black Friday weekend, and then were disappointed by the deceleration of traffic post that, in the weeks leading up to Christmas. We have been promoting more heavily, specifically on the clearance end of the business in factory, to move through some inventory and manage our inventory as efficiently as possible. So the good news is that Maria’s new product, and the new design that we have in the stores, is really checking with consumers, and we are selling that product extremely well, at above-average factory price points. And so when we have the traffic, we are able to very effectively convert and actually move ticket. So as we are into the spring season, we anticipate holding traffic, that we should be able to continue down the path of being really proud of the product that we put into factory stores and continue to convert the customers that are walking in.

And my second question was just more about setting appropriate expectations for the timing of the turnaround of the comp and which drivers would you prioritize for us as the most importance aspect?

Certainly we’re committed to driving productivity, as we have discussed, and long term value for our shareholders. We have of course also guided that we will not forecast the change in the trend until we see it. There is of course the knowledge that traffic is a likely indicator. We’re going to see conversions being the main driver. We’re excited about the fact that we have a tremendous amount of internal excitement already and what we’re seeing in new product coming out for September. We know that while shopping behaviors are changing, all of our traffic is being impacted globally, this is truly about great brands. And we’re focused on driving relevance for the Coach brand, getting back to the core, creating exciting shopping experiences for consumers, engaging with them online and in the stores in new and exciting ways, which is necessary in this changing environment, and doing so of course through all of our marketing mediums, whether it be through traditional advertising, social media, and the like. And we’re on a journey, and we will take you along with us on that journey, and we’re very focused, of course, on the fall, as a very important key next chapter for us as we continue with the marketing campaign that we already have, but also the presentation of Stuart’s first full collection in our full price channel, where we will have the largest single introduction of new SKUs that we’ve already had, in one launch.

The next question is from Liz Dunn with Macquarie.

My question is relative to your place in the marketplace. I guess you talked about the overall North American handbag market still being fairly robust, but obviously your business was tough. Traffic was tough. Do you think it has to do with a shift to business online? I’m just sort of struggling with how the overall market remains as robust as you see it being, but your problem is primarily traffic. If you could just help add context? Is it just that you’re not checking online to the same extent that your competitors are? What channel do you see losing the most share in?

I think most retailers today are seeing that the shopping mall channel is seeing the most pressure in terms of traffic overall. Our online business is more mature than perhaps some of the other competitors that we have. We’ve been in the space longer than most of our competitors. But saying that, as we discussed in our notes, we did take a very important strategic decision this past quarter to limit access, especially on our flash site, as we look at driving brand equity and moving forward. We know this is a long term journey. Specifically, we did not have third-party events via our flash web sales, as we had this time last year. And we’ve been also very vigilant in ensuring that we try and keep resellers off of our flash web sales model because of the impact that it has, of course, through the parallel channels both domestically and international. Our number one opportunity of course is in recruitment of consumers into the franchise here in North America, where we are still the leaders. We know that that’s going to happen in an omnichannel way, both through the wholesale channel, through our current partners, where there’s a definite opportunity for us to drive further relevance and a further strong presence for our brand, of course, through our own stores. And we realize that the full price channel has to lead. This is something that we shared with you, and we’re very focused on driving relevance through that as our most important priority, because of the halo that that plays across the entire brand. And for those of you that have visited our Lower Fifth Avenue store and you compare that experience with the rest of the Coach fleet, and you can imagine that across an entire fleet, as we tweak it, develop it, and perfect it, I think you see a Coach of the future. And of course as well through the digital channel, which is not only an important channel for communication, but increasingly for ecommerce. So it’s really about the brand across all channels.

The next question is from Bilun Boyner with JPMorgan.

It’s very encouraging that you mentioned you did not see price [unintelligible] and higher price points perform better. So when we get Stuart’s first [unintelligible] in September, where should we expect AURs for that line compared to the collection that’s lower priced? And you mentioned that you limited access through the [unintelligible] sale websites. I’m just trying to get a sense of how material that was. Was it a significant portion of the [unintelligible] business you cut out?

In terms of average price points, the over $400 bucket, as we talked about strength in that in the prepared remarks, we actually had a 7% increase in AUR over last year. So as we anticipate Stuart’s collection and look forward to his fall, the newness in his products, we do anticipate that AURs will increase. And balance in the assortment is important, but seeing that we are performing well in the categories where we had very emotional product, the consumer is willing to pay for it, and we will price the goods accordingly. In terms of the internet, and the limitation of the flash sale site, we did eliminate third-party, as we said, and paid search as well, and the reseller impact. Those things taken together did have an impact on the overall performance of our internet business, and if we took those out, we would have seen a moderate increase in internet sales.

The next question is from Bob Drbul with Nomura.

I just had one question. What led to the decision to have an analyst day, and what do you plan to share with us on that meeting?

We want to share details of the vision that we have. Obviously, seeing is believing. You will all be able to see the product in all of its glory, meet the teams that care, which is, as I’ve shared, and we believe strongly, without a doubt, the best team in the space, and share with you our vision for the future.

The next question is from Kimberly Greenberger of Morgan Stanley.

Victor, you mentioned the endeavor to restore brand equity, and I’m just wondering, how do you think about that effort over time with the ongoing increase in square footage in factory? It would seem in some ways that those two things worked against one another, given that typically expansion in factory is not really brand enhancing. It certainly increases distribution opportunity, but having more discount product out in the marketplace would not really seem to be congruent with the effort to restore brand equity. So I’m just wondering if you can help us with how you think about those two opposing forces.

It’s obviously a question we get often, and what I would share is that we believe the brand, first and foremost, must be led through the full price channel. And what you see, again, in Lower Fifth, what you see in South Coast Plaza, in terms of a direction for the future of our fleet and the equity that we want to drive through that fuller lifestyle experience, where consumers are engaging with the brand differently, without a doubt will be both a business driver but just as important, if not more so, the halo for the entire multichannel strategy that we have. Outlets, in terms of their importance globally, are unquestionably the fastest growing certainly bricks and mortar channel in the luxury space. That is not only true for U.S. based multichannel brands. It is increasingly true for European and traditional luxury brands who are driving further relevance for the channel globally, whether it be here in the U.S., where it’s quite a mature channel, but of course increasingly in Europe, and now, more than ever, increasing in China and the rest of Asia as well. And so as that channel grows, we want to make sure that we participate in it, and take our fair share there. Saying that, we’re very cognizant of the need, as a result of increasing competitor pressures in that channel as well, to remain relevant there. And many of you have visited our [unintelligible] Park rollouts, which is now our global rollout already, which we believe in that channel elevates the brand, provides a terrific experience, and I think just as you’re seeing and will see increased value, not just through price, but through great product, emotional product, in our full price channel. We will continue to see that moving forward in our factory channel. And that is the key. The key is not just to see it as a promotional channel, but to see it as a channel which is of relevance to a certain consumer, who does not shop in other channels, and where we have the leadership position and see continued growth moving forward.

The next question is from Faye Landes of Cowen and Company.

On the outlet thing, can you just give us some dimension? You implied that you’re going to be selling the excess full price product in the outlets channel, just to get rid of the inventory you have right now. How quickly do you think you can clear that, because as you’ve often indicated before, that’s not the core of your outlet strategy?

Our outlook is that we’ll be able to move through a great deal of our inventory over the next several quarters. And given the size, the productivity of our factory channel and the volume that we move through there, we have a lot of confidence that we’ll be able to clear through our inventory profitability over the next several quarters.

I would just add that this is not new for us. Many of you who have been with us on our journey know that even during the 2008/2009 crisis, it didn’t take us more than two to three quarters. This inventory is currency for us. It’s no more than 5% of our total sales, and we’ve always sold full price [unintelligible] in our factory channel. It adds to the relevancy of that channel. There are many consumers who are obviously looking for the hunt of what was in full price in previous months. And so we look to it as an opportunity and not necessarily a negative.

There are several drivers of inventory, one of which is our sales outlook that was lower than expectations. But some core drivers, like our distribution expansion, our higher average unit cost, and the acquisition of Coach Europe and our expansion into lifestyle categories have elevated inventory levels, some just based on the nature of the business. But in terms of that which is excess because of our sales outlook, we’ll move through that very quickly.

The next question is from Laura Champine with Canaccord.

This is, I’m afraid, just an extension of what Liz has already asked, which is can you talk about what is driving the strength in the category and how you diagnose, in the most important quarter of the year, an acceleration in market share loss, and what is being done specifically to address that other than obviously new product coming with Stuart’s arrival?

Well, the strength in the category really speaks to the message that we’ve been putting out there for many quarters now, which is obviously that consumers increasingly look to accessories as the most important part of their wardrobe. It’s what they are doing and leveraging in that sense, to identify themselves as they spend less on apparel and more on accessories. This is a cyclical shift that has been going on for over a decade now. Obviously, as a result of our own success, as a result of this growth in the category, there’s increased competition. That competition creates excitement in the category, which continues to drive it. The opportunity for us, of course, is to leverage our solid equities in our brands, the amazing team and know how that we have, and with new creative direction, to drive relevance in our brands and take our fair share of the market as we have in the past, and that’s what we intend to do. So our strategies for dealing with that are everything that we have been sharing with you in terms of transformation. We’re excited about having you all together with us on June 4, when we will share not only with you the details of our vision, but of course the strength of this team in terms of what we’re doing and how we’re going to execute moving forward.

And just as a follow on, is there a concerted effort to elevate the brand? And how might that change the market size that you can address in North America, if I am hearing that right, that there is an effort to elevate the brand to higher price points?

It’s a terrific question. You will see some increased SKU counts at the higher price points, but our strategy is not to change the range of our price points. Many of you will remember, during the financial crisis, when consumers were more price sensitive, we talked about a rebalancing in our assortments. What we’re seeing with obviously consumer confidence at levels that are much better, and the increased competition and excitement around the category, is an opportunity for us to leverage our core strength, our authenticity, quality, heritage, and the respect that consumers have for Coach as the leader in this space to continue to elevate and rebalance our assortment now to more SKUs in the above $400 space. But this is not about us becoming a European luxury brand tomorrow. This is about us driving desirability and driving, if you will, confidence in the brand in the mind of the consumer through increased value through quality.

The next question is from Randy Konik with Jefferies.

Can I just follow up on that, with pricing architecture, because you said on the call that about 22% is done at the greater than $400 price point, which is doing well. But 80% of your business is below that, and when you look on the website, you’re hit with price points right away that are $598, $698, $1,000, etc. And when you look at your key competitors, their opening pages on their websites are $298, $328, to $458. So I guess I’m just curious about how you’re thinking about pricing architecture and how to message that to the consumer, because again, when I look at the website, it just looks like the prices are just not accessible as they have been in the past. And just want to follow up with the point that you’re not going to alienate that lower price point offering. Just your thoughts there would be helpful.

It’s a great question, because I think what you’re looking at, as you open up our website, of course we always start with newest [unintelligible], with newness, and what you’re seeing on the top of the page there is the Borough. And thankfully, the Borough is resonating incredibly well. As you go into the bottom of that first page, or onto page two or three, you’ll see that we have not given up the $200 price bucket, $300/$400 price bucket, and that we continue to be very active in that space. As well, I think what you’ll see is that we will play across channels a little bit in a bit more targeted way. You’re going to see us develop more specific products that will be in more price sensitive channels such as that with our wholesale [unintelligible], versus what you might find in the flagship store, versus what you might find in a secondary market, either here in the U.S. or internationally. These are strategies that we’ve been leveraging globally quite successfully. There is, without a doubt, a very substantial opportunity above the $400 price point bucket. We know that that is becoming increasingly attractive not just here in the U.S., so I would ask us to think about that opportunity globally. As we see the logo business challenged, what is increasingly happening globally is brands headed further into the leather space. As many of you know, our European competitors have a very hard time achieving price points below $1,500, below $2,000, when it comes to leather handbags. And so the opportunity for us is not just to play with lower prices, but to play with increased value and perception through quality, and that’s where we’re going to look to change the value proposition in the months ahead, but doing so by rebalancing the assortment, not by shifting completely.

Thank you all for attending our Coach conference call this morning. As is our custom, it is now 9:30, and I will turn it over to Victor for some concluding remarks.