Coach Financial Analyze

Financial analysis: Coach Inc.

Executive Summary

Coach Inc. was founded in 1941. It is a designer and marketer of high-quality, modern American classic accessories and also it is one of the best well known accessories brands in the USA. Coach Inc mainly focused on the market of U.S. and Japan. By opening, and expansion of stores, Coach achieved an outstanding result in fiscal year of 2004. I will explain its performance by DuPont Identity, and compare with Wilsons The Leather Experts Inc.

DuPont Identity analysis

In year of 2004, Coach Inc has ROE of 0.3345, which means every dollar in equity Coach Inc. generates 33.45 cents. Compare to Wilsons The Leather Experts Inc.(Exhibits 1)ЎЇs ROE -0.248, stockholder of coach will receive more benefit. We can analysis this result by three parts of DuPont Identity. The profit margin of 19.81% illustrates that Coach generated 20 cents in profit for every dollar in sales. It net income almost doubled from 2003, which is mainly due to additional week of sales. Compare to WLSN (Exhibits 1)ЎЇs negative net income, Coach makes a lot more profits. Coach Inc. has a total asset turnover of 1.28, which means each one dollar of assets will generate 1.28 dollar in sales. It is lower than WLSN. However, the assets turnover looks low, it caused by the fast expansion of retail stores. During this fiscal year, Coach opened 19 retail stores and two factory stores and also the expansion of stores in Japan. This action will benefit the future sales. Lastly, Coach Inc. has an equity multiplier of 1.3149, which means the company is relying more on debt to finance its assets. Coach Inc. has lower equity multiplier than WLSN(Exhibits 1). It because the huge stockholdersЎЇ equity of Coach Inc.

Exhibits 1

Coach Inc.

ROE = Profit Margin * Total Asset Turnover * Equity Multiplier = 0.3345

Profit Margin = Net Income / Net sales = 0.1981

Total Asset Turnover = Sales / Assets = 1.2843

Equity Multiplier = Assets / Total Equity = 1.3149

Competitor:

Wilsons The Leather Experts Inc (WLSN)

ROE = Profit Margin * Total Asset Turnover * Equity Multiplier = - 0.248

Profit Margin = Net Income / Net sales = - 0.05347

Total Asset Turnover = Sales / Assets = 2.3389

Equity Multiplier = Assets / Total Equity = 1.9828

Exhibits 2

Income statement

PERIOD ENDING 3-Jul-04 28-Jun-03 29-Jun-02

Total Revenue 1,321,106 953,226 719,403

Cost of Revenue 331,024 275,797 236,041

Gross Profit 990,082 677,429 483,362

Operating Expenses

Selling General and Administrative 545,617 433,667 346,354

Non Recurring - - 3,373

Operating Income or Loss 444,465 243,762 133,635

Income from Continuing Operations

Total Other Income/Expenses Net 4,000 1,754 825

Earnings Before Interest And Taxes 448,465 245,516 134,460

Interest Expense 808 695 1,124

Income Before Tax 447,657 244,821 133,336

Income Tax Expense 167,866 90,585 47,325

Minority Interest (18,043) (7,608) (184)

Net

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