Segment Information

3 Months Ended

Sep. 26, 2015

Segment Reporting [Abstract]

Segment Information

Segment Information

In fiscal 2016, the Company has three reportable segments based on its business activities and organization:

• North America, which includes sales to North American consumers through Coach-branded stores, including the Internet, and sales to wholesale customers.

• International, which includes sales to consumers through Coach-branded stores and concession shop-in-shops in Japan, mainland China, Hong Kong, Macau, Singapore, Taiwan, Malaysia, South Korea, the United Kingdom, France, Ireland, Spain, Portugal, Germany, Italy, Austria, Belgium and the Netherlands. Additionally, International includes sales to consumers through the Internet in Japan, mainland China and South Korea, as well as sales to wholesale customers and distributors in approximately 50 countries.

• Stuart Weitzman, which includes sales generated by the Stuart Weitzman brand primarily through department stores in North America and international distributors, within numerous independent third party distributors and within Stuart Weitzman operated stores (including the Internet) primarily in North America.

The following table summarizes segment performance for the three months endedSeptember 26, 2015 and September 27, 2014 (in millions):

	North America		International		Other(1)		Corporate Unallocated(2)			Stuart Weitzman		Total
Three Months Ended September 26, 2015
Net sales	$	561.0	$	369.0	$	12.8	$	—		$	87.5	$	1,030.3
Gross profit	348.9		282.2		8.4		7.3			49.7		696.5
Operating income (loss)	171.7		107.2		6.1		(151.3		)	7.7		141.4
Income (loss) before provision for income taxes	171.7		107.2		6.1		(158.0		)	7.7		134.7
Depreciation and amortization expense(3)	15.8		16.8		—		17.1			7.5		57.2
Additions to long-lived assets	21.8		31.4		—		14.6			1.7		69.5
Three Months Ended September 27, 2014
Net sales	$	633.7	$	381.0	$	24.1	$	—		$	—	$	1,038.8
Gross profit	408.0		295.4		11.4		0.6			—		715.4
Operating income (loss)	221.5		118.0		9.3		(169.0		)	—		179.8
Income (loss) before provision for income taxes	221.5		118.0		9.3		(168.3		)	—		180.5
Depreciation and amortization expense(3)	13.0		15.7		—		27.8			—		56.5
Additions to long-lived assets	20.0		13.9		—		6.5			—		40.4

⁽¹⁾  Other, which is not a reportable segment, consists of sales and expenses generated by the Coach brand in other ancillary channels, including licensing and disposition.

⁽²⁾  Corporate unallocated expenses include Coach brand inventory-related costs (such as production variances), advertising, marketing, design, administration and information systems, as well as distribution and consumer service expenses. Furthermore, transformation-related charges incurred by the Company as described in Note 4, "Transformation and Other Actions" and to a lesser extent, charges associated with contingent earn out payments of the Stuart Weitzman acquisition (as described in Note 5, "Acquisitions") and other integration-related activities, are also included as unallocated corporate expenses.

⁽³⁾  Depreciation and amortization expense includes $2.8 million and $13.2 million of transformation-related charges for the three months ended September 26, 2015 and September 27, 2014. These charges are recorded as corporate unallocated expenses.

The following is a summary of all costs not allocated in the determination of segment operating income performance:

	Three Months Ended
	September 26, 2015			September 27, 2014
	(millions)
Inventory-related costs(1)	$	7.3		$	0.6
Advertising, marketing and design(2)	(63.1		)	(53.9		)
Administration and information systems(2)(3)	(80.3		)	(98.8		)
Distribution and customer service(2)	(15.2		)	(16.9		)
Total corporate unallocated costs	$	(151.3	)	$	(169.0	)

⁽¹⁾   Inventory-related costs consist of production variances and transformation-related costs, and are recorded within cost of sales. During the three months endedSeptember 26, 2015 and September 27, 2014, production variances were $7.3 million and $4.6 million, respectively. There were no inventory-related transformation costs during the three months endedSeptember 26, 2015. During the three months endedSeptember 27, 2014, inventory-related transformation costs were ($4.0) million.

⁽²⁾   Costs recorded within SG&A expenses.

⁽³⁾   During the three months endedSeptember 26, 2015 and September 27, 2014, transformation-related costs recorded within SG&A expenses were ($12.6) million and ($33.1) million, respectively. Furthermore, during the three months endedSeptember 26, 2015, ($3.6) million of charges related to the Stuart Weitzman contingent earn out payments and other integration-related activities were recorded within corporate unallocated costs. There were no acquisition charges during the three months endedSeptember 27, 2014.