Welcome to this 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 Global Head of Investor Relations and Corporate Communications at Coach, Andrea Shaw Resnick.

Good morning and thank you for joining us. With me today to discuss our quarterly results are Victor Luis, Coach's Chief Executive 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 years. These statements are based upon a number of continuing assumptions. Feature results may differ materially from our current expectations based upon a number of important factors including risks and uncertainties such as expected economic trends or our ability to anticipate consumer preferences, control costs, successfully execute our transformation and operational efficiency initiatives and growth strategies or our ability to achieve intended benefits, cost savings and synergies from the Stuart Weitzman acquisition. Please refer to our latest annual report on Form 10K and our other filings with the Securities and Exchange Commission for a complete list of risks and important factors. Please note that historical trends may not be indicative of future performs. Also certain financial information and metrics that will be discussed today will be presented on a non-GAAP basis which you may identify by the terms non-GAAP, constant currency, excluding the negative impact of foreign currency or excluding charges associated with financing short-term, purchase accounting adjustments, contingent payments and integration costs. You may find the corresponding GAAP financial information or metric as well as the related reconciliation on our website www.coach.com/investors and then viewing the earnings release posted today. Now let me outline the speakers and topics for this conference call. Victor Luis will provide an overall summary of our third fiscal quarter 2016 results and will also discuss our progress on global initiatives across markets. Jane Nielsen will continue with details on financial and operational results for the quarter and our outlook for the business for the balance of the year. Following that we will hold a question-and-answer session where we will be joined by Andre Cohen, President, North America. This Q&A session will end shortly before 9:30 AM, we will then conclude with some brief summary marks. I would now like to introduce Victor Luis, Coach's, CEO.

Good morning, thank you Andrea and welcome everyone. As noted in our press release we are very pleased with our third-quarter performance which was consistent with our expectations and reflects the return to growth for Coach across the key financial metrics of sales, operating profit and bps. We drove further sequential improvement in North America direct business with both channels strengthening similarly while the Internet also contributed to results this quarter. Our international businesses posted strong growth on a constant currency basis highlighted by double-digit increases in Mainland China and Europe as well as sales gains in Japan and other Asian countries. We were especially gratified by our ability to drive this inflection for the brand against the backdrop of macroeconomic and promotional headwinds and amid volatile tourist flows globally. Overall, our results continue to give us confidence that the cumulative impact of our actions will continue to drive topline growth this fiscal year and positive North American comps in the fourth fiscal quarter. Importantly, during the third quarter we delivered on our plan across businesses and geographies while continuing to successfully execute our brand transformation across the key consumer touch points of product, stores and marketing. Our elevated Coach 1941assortment resonated in our retail stores globally as well as in key new specialty retail accounts having debuted in Nordstrom Saks Opening Ceremony, Fred Segal and Jeffrey New York as well as Colette in Paris, LUISAVIAROMA, Umeda Hankyu in Japan, Galleria West in Seoul and Lane Crawford in Greater China. In outlet our snoopy fashion vignette was particularly well-received and we will continue to surprise and delight the consumer in this channel with increased levels of innovation. We continue to transition the fleet into our modern luxury concept driving comp improvement. Finally, our new heritage marketing campaign focused on originality…

Thanks, Victor, and good morning. Victor has just taken you through the highlights and strategies. Let me now take you through some of the important financial details. Please note, the comments I'm about to make are based on non-GAAP results corresponding GAAP results as well as the related reconciliation can be found in the earnings release posted on our website today. Overall, we are very pleased with our performance in the third quarter which marks a return to growth for the company. With an inflection across the key metrics of sales, operating profit and earnings. These results clearly reflect the positive impact of our transformation strategy augmented by the Stuart Weitzman business. Consolidated net sales totaled 1.03 billion for the third fiscal, an increase of 11% versus prior year. On a constant currency basis total sales increased 13% for the period. Net sales for the Coach brand rose 3% in dollars and 4% on a constant currency basis with both the North America and international segment up on a year-over-year basis. Stuart Weitzman brand sales were 79 million in the quarter, total gross profit was 713 million, an increase of 7% compared to the year ago period while gross margin was 69% versus 71.6% last year negatively impacted by foreign currency and the inclusion of Stuart Weitzman in this year's margin. Coach brand gross margin was 69.9% and included approximately 110 basis points of pressure from currency. In terms of trends by segment, North America gross margin declined on a year-over-year basis but to a lesser extent than in the first half of the year as planned. Margin continued to be negatively impacted by increased promotions in the outlet and wholesale channels in response to heightened discounting activity. These decreases were partially offset by the impact of an improved mix…

[Operator Instructions]. Our first question comes from the line of Bob Drbul. Sir, you may ask your question.

I’ve a two-part question on sales really. Given that you mentioned January was impacted by the shorter winter sale and your accomplish [indiscernible] for the quarter, wouldn’t that suggest that you are already running a positive comp for the last two months February and March? And the second part of it is, taking it one step further when you think about your guidance for the positive North American comp in the fourth quarter, would that suggest you’re running a positive comp right now as well?

Thanks for the question, Bob, it's certainly hard to argue with the math and I think that you can certainly safely assume that we did indeed have positive comps in February and March as you suggest. In terms of the fourth quarter, look we still have a couple of months ahead of us but certainly is a team we remain confident in our guidance of positive North America comps for the quarter?

[Operator Instructions]. Our next question comes from the line of Ike Boruchow of Wells Fargo. Your line is now open.

So I guess Bob took sales I'll take margin. So I just wanted to dig into the fiscal '17 margin comment about 20% for the Coach brand so that's pretty impressive step up from what looks like will be something around 17% to 18% this year. Can you just kind of walk us through the drivers there? Maybe bucket the biggest opportunities as you see it and conversely what you think are the biggest headwinds you face on the margin front as you get into next fiscal year?

Sure, you know, as we've stated our operating margin guidance for fiscal FY ‘17 is really premised on the return to growth in-line with the category of the Coach brand. We now expect the category to be in the low to mid-single-digit range, a very stable growth margin on a constant currency basis of 69% to 70%. So stable gross margin, top line growth and then we will leverage SG&A to get to the operating margin expansion that leverage SG&A fully incorporates what we called out in our original transformation plan which was the restructuring actions that we will conclude with this fiscal year and a small benefit from the operational efficiency initiatives that we announced today.

Our next question comes from the line of David Schick of Consumer Edge Research. Your line is now open.

So I'll go back to sales on a longer-term basis. You talked about e-commerce impacting the comp positively and also you talked about the net effects of the Chinese consumer in different markets. Could you talk about how to think about e-commerce impacting your, over the long-term you know going forward and again, sort of on a net basis what's the right way to think about the longer-term trend in the Chinese tourist impacting all these different markets?

Sure, in terms of e-comp we have now of course anniversaried all of this eOS pullback so we would expect it to grow at least in-line with what is happening in our store network. Of course look, the consumers are continuing to shift online so I will not be surprised if it is growing at a slightly faster pace than the store network from here on out now that we have comped all of the pullback. In terms of the Chinese consumer and the excitement, look, first and foremost, the long-term opportunity with the Chinese consumers is as present as ever. I could not be more excited about what we're seeing in terms of even government policies still focused on domestic consumption, the infrastructure continued to develop in the mainland which is obviously helping domestic consumption as well, as well as the continued traction that our team is driving for the brand there and it's absolutely vital of course because relevance on the Mainland will mean relevance wherever the Chinese consumer chooses to shop as they travel globally. Today what we are seeing most recently as I mentioned earlier is of course the impact of the terrorist attacks in France and specifically in Paris having a direct negative impact on Chinese tourists flows there, we’re seeing slightly negative flows here into the U.S. as well of course as continued negative flows into Hong Kong and Macau. That is one area where we thought in the fourth quarter we would have seen ourselves comping the fall from last year and we have not. But that's more than being offset by the very strong growth that we have continued to see in Japan, Korea and increasingly in Southeast Asia and although many of those markets are distributor run, we’re very excited by what we’re seeing in Thailand and in Australia as well.

Our next question comes from the line of Erinn Murphy of Piper Jaffray. Your line is now open.

I wanted to focus on the outlets actually. I realized that they are lagging the full price in part on plan but maybe speak a little bit more about some of the initiatives you're working on to close the gap in performance between full pricing whether you can expound upon the upcoming [indiscernible] that you have in this channel and any tweaks that you're making now to the remodel strategies you’ve gone deeper into that? Thank you.

Well first let me start by saying both channels actually improved on a similar rate sequentially so we are pleased with the performance both in retail and in outlet. We had always said that retail was going to lead so the retail performance in absolute terms is slightly ahead of outlets. Basically a couple of main areas we've been working on in outlets specifically one is design and innovation. We've realized through the vignette I think Victor mentioned in his prepared remarks on snoopy that when you have got real innovation and emotion it trumps price. It was successful and it's something that we are planning to replicate over the next few quarters both in terms of these one-off sort of we call them play concepts and more generally in terms of putting more design and innovation in the outlet channel. In terms of the modern luxury renovations, they have not been as successful as in retail. We've not moved the needle that much, that said we have got a number of learnings that we are currently addressing. We have used our Woodburry common store as a pilot where we have done things such as moving more product to the floor. We’ve realized that when there is too much product on the wall, not enough on the floor it effects impedes conversion. We've fragmented the store a bit too much so you don't get a sort of 360 view when you enter the store etcetera. So loads of small operational improvements. The positive news is that in Woodburry when we started these tweaks about two or three months ago we have seen an improvement in the control of the metrics conversion in ADT, so good learnings and we're going to keep implementing them throughout the chain.

Our next question comes from the line of Randy Konik of Jefferies. Your line is now open.

I guess just back on the outlets. You’ve done a great job on the full price channel getting rid of those promotions and moving to a more full price higher average ticket business. You talked a little bit about, just a little bit about the increased promotions and outlet wholesale. Can you give us some perspective on what inning we are in their where you can potentially maybe walk a little away from those promotions? And just a little more flavor there will be very helpful. Thank you.

I will let Andre start with outlets and then I'll take the wholesale channel.

Sure, so we have certainly seen the environment become more competitive in outlet generally over the past couple of quarters. Traffic has continued to drop and competitive intensity has increased. So we have been pragmatic in dealing with that. We have been promotional where we had to be, we have pulled up where we could. Going forward again the plan is to innovate more to just have a high content of newness, innovation and more emotional play concepts to offset the price pressures we have seen over the last couple of quarters.

In terms of the wholesale channel, look, I think all of you who traveled to the department store world where we are present in North America obviously very aware of the environment. You may also follow a lot of the brand trackers that are out there in terms of sales to understand what is happening with promotions and AUR in that channel and I would say that we are in the very early inning there of our transformation. As many of you know, we've invested now and I just mentioned in my prepared remarks in 12 locations in the new concept, that's out of a thousand that we have across North America. We are investing in the shop manager program for the Top 50 locations by the end of this fiscal year and in both of those cases we are seeing a inflection versus the rest of the fleet. In addition of course, we have made very significant progress in our penetration with the Tier 1 department stores with 1941 while also pulling back on those Coach specific promotional days. Irrespective of all of that, the absolute number of chain wide sale days continues to be an issue in that channel and we continue as a team to have discussions with our partners about a couple of areas. One, first and foremost is the potential for the pull back on all our promotions which would include our exclusion and cooperation with our partners from the bulk of storewide event and quite frankly we are also looking at potentially exiting lower volume doors going forward. So these are considerations we are taking right now.

Our next question comes from the line of Oliver Chen of Cowen & Co. Your line is now open.

Regarding inventories, our question is regarding inventories and what are the thoughts regarding the next few quarters in holiday in terms of the context of the handbag sector and the promotional environment? And also in context of how you are thinking about how you will bucket prices with the 300 below versus the above 400 mix? Thanks.

I'll let Andre start with first and foremost the bucketing strategy and dealing with seasonality in that area and then Jane will take total inventories.

Yes, so as you know for Q2 our holiday quarter we had beefed up our gifting assortment to be able to just offer a wide range of prices and that strategy worked well. Coming out of Q2, we focused on our elevation strategy with 1941 launching across the bulk of the chain. We have seen a significant improvement in our $400 and above price point. It's now 40% of the business. Overall our AUR handbags have actually record high of $300, that’s the highest we have been in handbags since fiscal '09. So the elevation strategy is working. Obviously as we get into the more holiday periods we will flex with again with a wider gifting assortment at a wide range of price points.

Oliver, if you look at inventory, as it's been our case, we always look to match inventory roughly in-line with our sales growth outlet. So I think you'll start to see inventories and very modest growth in the fourth quarter and moving into FY ‘17 is very much in line with our sales outlook and expectations.

Our next question comes from the line of Michael Binetti of UBS. Your line is now open.

I know there been a few questions on the outlets. If I could just -- I guess I was just thinking a little bit more broadly about North America brand sales. As we think about your guidance next year Jane for low to mid-single digits North America comp growth roughly in line with category, I guess by channel you sound clearly more comfortable with the sustainability of what you are seeing in full price. Do the outlets in your mind need to be positive to deliver that kind of low to mid -singles on a sustainable basis for the blended comp? And if so maybe just a few comments on what you're seeing that gives you confidence that the outlet channel contributes you know at the positive level in the next year.

So I just want to clarify that our guidance just to be specific is for North America would be our growth and globally in line with the category which we now see to be low to mid-single digits as is our custom will come back with more specific guidance in Q4, but what we've seen is a sequential improvement in both channels they improved this quarter similarly and we would expect to see continued improvement as we move into FY ‘17.

Our next question comes from the line of Anna Andreeva of Oppenheimer. Your line is now open.

We are hoping to talk about the initial CapEx expectations in '17. As the headquarter investment rolls off, how should we think about the free cash flow generation in the business and as we think about priorities for cash could we I guess expect a dividend increase as net income is inflicting now? And just quickly follow up on what sounds like positive quarter to-date comp are you seeing improvement in the outlet channel as well? Thanks so much.

So why don’t I take the cash flow and dividend and then I will turn it over to Andre on the outlet channel. So as our net income growth and we complete the buildout of our headquarter building you will see a corresponding cash flow growth as we move into FY ‘17 as expected. Our dividends is really a part of our priorities for cash and our priorities for cash are really unchanged. First and foremost, investing in the organic growth of our business. Second priority being M&A value creating acquisitions. As I said, nothing eminent but we want to remain open and flexible should we find something that we believe will create long-term value for Coach, Inc. in our shareholders and then finally is the return of capital to shareholders with our commitment to the dividend. We look at our dividend annually with our Board in August as we talked about in April 2014. We will look at the dividend in August that coincides with our year-end results and outlook for the following year and make a determination at that time.

In terms of just the fourth quarter, we’re left unplanned with -- we're still working towards a positive comp for the quarter. We've seen all the indicators that we saw at the end of the third quarter, still maintaining the momentum and we’re on plan, I'm not sure what -- all I can say at this point.

Thank you. That will conclude our Q&A as we are now past 9:30 and the market has opened. I will now turn it over to Victor for some concluding remarks. Victor?

Thank you Andrea. Let me just thank everybody for joining us. A very important quarter for us this past third quarter as it marks a return to growth for the Coach brand. I could not be more excited with the momentum in our business and as a team, we are obviously very proud of the evolving perception not only of the Coach brand but up Coach, Inc. and our impact in the marketplace. The positive impact of our brand transformation augmented by of course Stuart Weitzman is clearly reflected in the overall financial performance with terrific inflection across all of our key metrics with sales, profit and earnings growth for the first time since the fourth quarter of '13. The turnaround of course that we've achieved to-date underscores our confidence in driving sustainable and profitable growth for Coach, Inc. over the long term and I could not be prouder of our entire team for the work and commitment that they have put in to driving our brand and the passion that they are showing to win in the marketplace. Thank you, all.

This does conclude today's Coach, Inc earnings conference. We thank you for your participation.