Coach Responds to Analyst's Takeaways from China Trip (COH)

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From Coach's (ticker: COH) fiscal Q2 2006 earnings results conference call conducted this morning:

Jeff Edelman - UBS Securities

….I was just over in China, and I had two takeaways: One, it appears as if leather duties were going to increase this spring, doubling; secondly, wage costs are going up fairly significantly. Have you got the opportunity with either greater volume with factories and/or sourcing efficiencies to at least offset or more than offset this as we look out into calendar '06?

Coach Management

The good news is, is we've looked into the proposed changes to the duty structure. It will not impact Coach as we import the leather into the country rather than buy leather supply in China. The movement of the wan is a potential impact for us, but it is very small. The value add in China, the labor content and the profit that our factories make is a very small component of cost of goods sold, and we would anticipate that the blocking and tackling throughout the supply chain will largely be able to offset it, should the wan devalue in the coming year.

(Quotes are from the CCBN StreetEvents transcript.)

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