Andrea Shaw Resnick – Global Head of Investor Relations and Corporate Communications Victor Luis – Chief Executive Officer Jane Hamilton Nielsen – Chief Financial Officer.

Bob Drbul – Nomura Matthew boss – JPMorgan Barbara Wyckoff – CLSA Joan Payson – Barclays Ike Boruchow – Sterne Agee Anna Andreeva – Oppenheimer Oliver Chen – Cowen & Company Dana Telsey – Telsey Advisory Group Erinn Murphy – Piper Jaffray.

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 the 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 and future quarter 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, our quarterly report on Form 10-Q for the period ended December 27, 2014, and our other filings with the Securities and Exchange Commission for a complete list of risks and important factors. Also [indiscernible] future performance. Now, let me hand over to Victor Luis to this conference call.

Victor Luis will provide an overall summary of our third fiscal quarter 2015 results and will also discuss our progress on global initiatives across markets. Jane Nielsen will continue with a detailed analysis on financial and operational results for the quarter and our outlook for the balance of the fiscal year.

Following that we will hold for question-and-answer session. The Q&A session will ensure that [indiscernible]. We will then conclude with some brief closing comments. I would now like to introduce Victor Luis, President and CEO..

we plan to add about 10 directly-operated locations and more than 100 wholesale locations. Finally, and as we have expressed in the past, we also believe there was a significant opportunity for the Coach brand in global travel retail, which represents the majority of our international wholesale sales.

At quarter end, we had a total of 215 international wholesale locations in 31 countries, which included 113 travel locations and expect to add about 25 net additional locations by year-end. Now I’ll ask Jane to provide some additional detail on our financials and outlook for the balance of the year.

Jane?.

overall our annual guidance has not changed for FY 2015, although the noted project shifts and stronger dollar will impact reported sales and SG&A dollar spend. First on sales, we still expect to deliver a low double digit decline in constant currency in fiscal 2015.

Given the strength of the dollar, we continue to expect sales to be down more on a reported basis. Overall, for FY 2015, we expect continued pressure on sales due to our reduced promotions and store closure activity. This guidance assumes that fourth quarter sales will be down by similar levels at Q3 on both a constant currency and reported basis.

In the fourth quarter, we continued to expect an improvement in North America bricks-and-mortar comp despite the more difficult comparison. Our EOS pullback will pressure total North American comps by about 10 points.

Coach Japan is expected to post positive growth in constant currency, benefiting from the lapping of the consumption tax increase and higher PRC tourist flows. However, we do expect softness in the rest of Asia, specifically in Hong Kong and Macau, based upon deteriorating conditions as has been noted in recent weeks.

Keep in mind that in last year’s fourth quarter, we reported an increase in disposition sales which we will not anniversary given our current and clean inventory position.

Gross margin is still projected to be in the 69% to 70% range for the year, reflecting our usual seasonality between the third and fourth quarters, with higher sourcing costs largely offset by favorable channel mix and lower promotional activity for the year. We expect our fourth quarter gross margin to be similar to the prior year.

SG&A expenses are now expected to be slightly below prior year, reflective of our increased marketing spend and transformation initiatives, offset by shifts in fleet actions, currency, and the faster realization in savings than anticipated. Therefore we expect SG&A dollars to be down slightly in the fourth quarter.

Taken together, we continue to expect operating margins to be in the high teens for the year. Finally, our tax rate is still expected to be in the area of 32% for the year, so there may be some variability in the fourth quarter. In closing, I would like to reiterate Victor’s earlier remarks.

We laid out a very clear plan last summer, and its execution is well underway. You heard this morning about our brand transformation progress around product, stores and marketing, as well as our key learnings and takeaways. And I will add that we are also on track from an investment and restructuring perspective.

We have taken the majority of our total expected transformation related charges over the last four quarters, including rightsizing our inventory levels.

We’re investing in re-platforming our stores and wholesale doors and are on track to spend about $570 million over the next three years so the timing of some projects have moved to an FY 2015 as noted. We have begun to realize our cost savings, running a leaner, more efficient organization sooner than we expected.

Therefore looking further ahead, we expect to realize an overall annual top-line improvement beginning in FY 2016 with FY 2017 being the year where we return to growth in line with the category. We have the resources to fund our plan while maintaining our dividend during our heavy investment period.

Ultimately, our objective is to restore Coach to a place of best-in-class profitability and sustainable growth. I’d now like to open it up to Q&A..

Thank you. [Operator Instructions] The first question today is from Bob Drbul with Nomura..

Hi. Good morning..

Good morning, Bob.

Morning, Bob..

I guess the question that I have is, you know, this was I think the first quarter with some of the newer product in the Outlet business in North America.

So can you just elaborate a little bit more what’s going on in the Outlet business? Did it in fact show sequential improvement from the second quarter?.

product, stores and marketing, and doing so across all three channels, our full price channel, wholesale and outlet.

And even if we do believe that of course the full price channel will lead, we have been focused on the outlet channel, as you mentioned, with approximately one-third of the product in the outlet channel last quarter having been Stuart’s designs.

Specifically, we launched a collection called Margo in Q2, which in Q3 was joined, as I shared in my notes by Mickey, Ruby and Morgan, and we’re very pleased with the performance there. And I would say most generally our approach in product of just providing value by putting a lot more make and quality into products has been incredibly well received.

And we have seen that in a very strong increase in our ADTs. In terms of the stores, I mentioned in our notes, we just recently a few weeks ago opened up our first Modern Luxury concept store in is Savannah, Georgia. That is a new store. Many of you have seen our previous concept, most recently perhaps in Cabison, which is our Deer Park concept.

And I think once you see the Modern Luxury outlet stores, you’ll understand why we’re really excited about this next evolution, and certainly seeing that in Savannah, where the very initial results have been beyond our own expectations.

And lastly on the marketing front, while we don’t outwardly of course market to the outlet consumer through advertising or social media or any other means, we do through direct e-mail.

And of course most importantly through our in-store customer experience, visual merchandising and our vendors, and there we’re making great strides as well in continuing to elevate that experience as well.

Great. Thank you very much..

Thank you. The next question is from Matthew boss with JPMorgan..

Hi. Good morning.

So can you just help walk us through the bridge in your store comp between today and then your expectation for the return to growth at some point next year? And with that, when will we be fully apples-to-apples on a promotional basis?.

From a promotional basis in terms of being apples-to-apples, it’s really looking toward July. Once we get beyond, of course, our seasonal clearance, which we will have comps this past year as well as of course getting beyond the event.

From a third quarter of 2016, we will be apples-to-apples on EOS, which of course we have reduced from what was in essence three a week now to as I mentioned on my call two per month on average..

Okay.

And then on the margin recovery, what type of sales recovery is needed to move EBIT margin, you know, say back to mid 20s which we saw only a few years back? And do we need to think about any kind of expense build next year given some of the – it sounds like some of the store builds potentially shift into next year?.

Yeah, Matthew, as we talked about in June when we laid out our long-term transformation plan. We will – right now in FY 2017, we’ll return to growth in line with the category. And our guidance suggests that that’s the point we’ll be back in the higher 20% margin range.

As you look at FY 2016, what we have called out is that some of our store renovations and flagships have shifted into FY 2016. So that will put some SG&A pressure into FY 2016. Again, we’re executing the plan as laid out. There’s just a shift in timing here..

Okay. Great. Best of luck.

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

Morning, Barbara..

Hi, everybody. Can you talk about the dynamic of the U.S. full-price stores versus outlet traffic conversions? You talked about ADT being up in outlets. What about the full-priced stores? And then maybe touch on the mix a little bit.

How has it changed?.

Sure. Pretty much consistent with what we have been experiencing last quarter, Barbara, and what we shared, which is performance has really been driven by ADT across both channels. Even if we have seen a sequential improvement in the traffic from the second quarter to the third quarter, it still remains a drag.

Of course in full price, that’s very much also driven by the broader pressure that we have seen across malls.

In terms of other news in the full-price channel, very pleased still with the performance that we’re seeing in the above $400 price bucket, which I mentioned in my notes is now still hanging at above 30% penetration compared to the 23% last year.

Good performance in our footwear business across all channels, full price included, and of course beyond that driven by a reduction in conversion, which as we have consistently communicated is impacted by of course the promotional cadence year-on-year.

In the full-price channel, once we get beyond semiannual sales, so into July, we’ll be on a like-for-like comparison with promotions. So there we should see of course a change in those trends..

All right. Thank you.

Are you going to still be not participating in doing Coach Days in department stores? Or was that just a test for the spring season?.

No. That has been our strategy for the whole year, and that is our strategy goes forward..

Thank you..

Thank you..

Thank you. [Operator Instructions] The next question will be Joan Payson with Barclays..

Hi. Good morning..

Morning, Joan..

So just in terms of some of the dynamics we’ve been seeing with tourist traffic in the U.S., could you just quickly touch on if that affected comps at all in North America? And then also just in terms of the overall category growth comments you had in terms of mid-single digit growth, it looks like Coach has now been more focused on basically product over $200.

So are you seeing any differences in category trends in the over $200 versus under $200 segment?.

Sure. In the tourist flows we have not seen dramatic changes in our North American business.

As I did mention our notes, the major change in flows of what we’re seeing, especially in terms of the PRC consumer are really within Asia, with especially Tokyo, Seoul, Taipei picking up increased tourist flows at the expense of a reduction in Hong Kong and Macau for all of the reasons that most of you know of course with the geopolitical conditions there.

In terms of the North American category, we have not seen necessarily a slowdown in the below 200 and increase in above 200. We have been speaking very much to our own strategies and two of course our own individual performance.

In general, the slight slowdown that we talked about in the category has really been at the expense of the larger brands in the space, which of course is driven in part by our own pull-down in our promotional activities that we have mentioned very consistently..

Great. Thank you..

Thank you..

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

Hi. Good morning, everyone. Thanks for taking my question..

Good morning..

Victor, I just wanted to ask a higher-level question regarding your traffic and profitability within the full-price channel. So excluding EOS. So, you’re doing a great job holding back from discounts and markdowns within your stores, but some of your bigger competitors are building larger clearance sections and going deeper on their sale merchandise.

Is there a point where you need to evaluate your thought process around how you balance sales and margins? I guess basically does your customer need more value to come back into the store to get the traffic positive again is what I’m asking?.

Yeah, of course in many ways that is job description for us, and we have to obviously continue to evaluate what is happening across all channels. EOS does not really impact the full price business. It has been a flash sales model focused on our outlet consumer database only.

And in the case of the full-price channel and what we’re seeing with the competitors and how promotional they may be, either seasonally or openly, for us it’s really about continuing to improve our own product assortment and looking to balance price points across all of the price buckets.

So rather than producing and introducing a product that’s, say, $300 or $400 and having it on sale constantly in the full price channel for $30 or $40 off, our preference is to give the consumer value by giving them and creating consumer trust by giving them a great product at a suggested retail price.

And then at the end of the season, that product which doesn’t perform is the case with most fashion brands will go on sale, and then eventually if it doesn’t sell there of course into our outlet channel. So our focus is really on getting the balance at full price within all of those buckets.

We have seen that over the last quarter and communicated it specifically at gifting periods. And that is something that we are developing into..

I would just add, Ike, that as we move to semiannual sale, one of the benefits that we saw is that it did pull new consumers into the store as we switched from PCs which went to our loyal consumers to semiannual sale, we saw new consumers enter the store during that period which was a benefit..

Got it. Thanks so much.

Thank you. The next question is from Anna Andreeva with Oppenheimer..

Great. Thanks so much. Good morning..

Good morning, Anna..

very tightly managed, down 23%.

Do you think any of that possibly constrained top-line in North America, and how do you feel about inventory content heading into the fourth quarter? And just curious, on the gross margin expectation for 4Q being flat, why couldn’t we see upside to that given that you’re pulling back on promotions pretty successfully? Thanks..

Sure, Anna. Just as we said today, we’re very pleased with our inventories. I think we’re well-positioned. We feel that we’re well-positioned to support our sales plan as we move forward and as we move forward and as we move into the fourth quarter, our inventory is fresh and in great shape. So we feel good about where we’re at.

We made a commitment to manage our inventory tightly as we came out of our transformation, and that’s what we did.

On your question on gross margin in the fourth quarter, we’re really executing against our strategy, and that is to keep making our product, valuing our product, pull back on promotion, and balance the headwinds that we’re seeing in rising sourcing costs and FX. And that’s what you’ll see play out in the fourth quarter as it’s played out all year.

There will be pushes and pulls. We expect a little bit more pressure from FX, and we’ll see our production variances move more in line with what we had in the first half, which is about 50 basis points of pressure. Even though it’s after 9:30, operator we’ll take a couple of more questions understanding that our prepared remarks went a bit long.

So you can continue to take Q&A..

Thank you. The next question is from Oliver Chen from Cowen & Company..

Thanks. Congrats on the progress of the brand management.

Regarding Stuart and the outlet opportunity ahead, could you give us a yardstick from which you’ll reach a half or three quarters and then as we think about the metrics, is this main impact as he illustrates more progress on this assortment ticket or traffic or a combination of both? And then, Victor, I just had a question on the inventory composition with respect to the pricing spectrum.

Are you happy with the freshness across your different price points including, you know, the access?.

Sure. Let me first touch on the inventory one, and then I’ll talk a little bit ability outlet products from Stuart and how that flows in. On inventory, we’re very happy both with the freshness of the inventory and with the sell-throughs that we’re seeing.

We are really pleased with the product that we continue to launch in the full price channel, and as I mentioned in my prepared notes, especially what we’re seeing with our new macro style in swagger and some of those styles in certain fabrications.

We’re very much in chase mode, and that is a collection that we will continue to develop into and have a lot of excitement and innovation that we’re working into that line over the course of the next 12 months or so.

In addition, we have been, as I mentioned in my reference to Ike’s question, continually developing into the key price buckets and functionalities.

We have some key tote silhouette coming out from June, another key carryall silhouette coming out in August, and other smaller cross-body especially at shopper price points but for the full price channel coming out throughout later in the fall and into spring into holiday and spring of next year.

So very, very actively developing for balance across all price points.

In terms of outlets and the continued rollout of Stuart’s product, by fall and into holiday, the vast majority of outlet product will be new designs and even current designs that are there will get a certain freshening up facelift if you will so that all products will have Stuart’s influence in it. We’re very pleased.

And there again our strategy continues to be to provide great value to the consumer at great price points, but certainly to continue to invest in giving the make and to continue to elevate the product..

Thank you. Best regards..

Thank you..

Thank you. And as a reminder, we do ask for one question per caller. The next question is from Dana Telsey with Telsey Advisory Group..

Good morning, everyone, and nice to see the improvement. I was in the Beverly Hills store last week, and I can tell you that it looked terrific..

Thank you, Dana..

As you think about the gross margin impact of fewer promotions versus higher leather goods, how should we – because this is the first gross margin improvement we’ve seen in, like, six quarters.

How should we see that gross margin continue to trend and will more of the improvement come from the fewer promotions, higher leather goods? How are you seeing it? And are you seeing this penetration or product globally? Thank you..

Thanks, Dana. So the way our strategy is to balance the pullback in promotions with the increased make that we’re putting into the product. So that’s sort of the strategy. We balance those two with a very high gross margin. As we have called out through our transformation, we expect that to be in the 69% to 70% range.

There’ll be some pushes – pushes and takes in terms of sourcing costs and FX, but overall we’ll continue to have our tailwind benefit as international grows sets the growth pace and that will continue to be a tailwind for gross margin overall. But it’s really balancing those two and managing the headwinds and tailwinds..

Thank you..

Thank you. Our final question today is from Erinn Murphy with Piper Jaffray..

Thanks. Good morning. I just want to go back to kind of your comments in the prepared script on higher promotional activity in the category.

Are you seeing that across the board from your competitors? Is there a specific channel that that’s showing up? And then in particular, and then if you take a step back, if the category remains increasingly promotional, are you worried about kind of the timeline as you kind of work on improving your own promotional cadence and kind of elevating the product in terms of the turnaround? Thank you..

Sure. Thanks, Erinn. We have seen of course the outlet channel by its very nature is a promotional channel. So there’s nothing new there. It’s always been promotional. And from our perspective there, the key is of course to engage and convert consumers coming in. We don’t outwardly advertise to that channel, and it’s about providing them with excitement.

And I think that the step change that we’re making across all of the consumer touch points in that channel with our new store concept, of course most importantly the new product, which is now across stores as well as our new visual merchandising guidelines, are proving to be the winning recipe there rather than providing further increased discounts at the moment.

So very pleased there. In terms of the other channels in our own full-price channel and the shopping mall, I think there was some reference to some competitive brands potentially always being on sale. That is not our strategy. We – both in our full price stores and in .com we have the seasonal sales.

We believe that that is the best way to build relationships with our consumers. In the case of the wholesale channel, we are not participating in our own Coach days, and I believe that was a question asked earlier by Barbara in terms of Coach-only events. We have reduced those, and that was a reduction of 30 – by 30 days compared to last year.

Of course there are other promotional days that are across the channel that we participate in to some extent. Wholesale is really 8% of our total business, and we’re really focused in driving the transformation plan per the strategy that we have laid out..

Thank you. That concludes our Q&A. I will now turn it over to Victor for some concluding remarks.

Victor?.

Thanks, Andrea. I want to once again thank you all for following us and continuing to be on this transformation journey.

As a team, we’re incredibly encouraged by the positive signs that we’re seeing in the execution of our strategies as we continue to drive first and foremost fashion relevance for the Coach brand, as well as to differentiate it from the accessible luxury competition that has grown over the last 5 to 10 years.

I want to recognize our entire Coach’s team for their commitment and most importantly for continuing have the courage and the discipline to stay the course with our strategies, which are very much in the long-term interest of our brand health and of our business.

And I know that I speak for all of us at Coach as we prepare to welcome the Stuart-Weitzman team to the Coach, Inc. family and looking out with great excitement to having them join us. So with that, I thank you all, and look forward to seeing you over the course of the next few months. Thank you..

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