Victor Luis - President of Coach Retail International Jane Nielsen - Chief Financial Officer, Chief Accounting Officer and Executive Vice President Andrea Shaw Resnick - Senior Vice President of Investor Relations & Corporate Communications Lew Frankfort - Chairman and Chief Executive Officer Jerry Stritzke - President and Chief Operating Officer Michael D. Tucci - President of Retail Division - North America

Barbara Wyckoff - Credit Agricole Securities (USA) Inc., Research Division Brian J. Tunick - JP Morgan Chase & Co, Research Division David A. Schick - Stifel, Nicolaus & Co., Inc., Research Division Christine Chen - Needham & Company, LLC, Research Division Neely J.N. Tamminga - Piper Jaffray Companies, Research Division Robert S. Drbul - Barclays Capital, Research Division Randal J. Konik - Jefferies & Company, Inc., Research Division

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 Senior Vice President of Investor Relations and Corporate Communications at Coach, Ms. Andrea Shaw Resnick. You may begin.

Good morning, and thank you for joining us. With me today to discuss our quarterly results are Lew Frankfort, Coach's Chairman and CEO; and Jane Nielsen, Coach's CFO. Mike Tucci, President of North American Retail, is also joining us to discuss our holiday performance and brand initiatives. Before we begin, we must point out 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. 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 for a complete list of these risk factors. Also, please note that historical growth trends may not be indicative of future growth. Now let me outline the speakers and topics for this conference call. Lew Frankfort will provide an overall summary of our second fiscal quarter 2012 results and will also discuss our strategies going forward. Mike Tucci will review the holiday season from a U.S. Retail perspective and discuss key initiatives for the spring season ahead. Jane Nielsen will continue with details on financial and operational results for the quarter. Following that, we will hold a question-and-answer session where we will be joined by Jerry Stritzke, our President and Chief Operating Officer; and Victor Luis, our President of International Retail. This Q&A session will end shortly before 9:30 a.m. We will then conclude with some brief summary comments. I'd now like to introduce Lew Frankfort, Coach's Chairman and CEO.

Thank you, Andrea, and welcome, everyone. As noted in our release this morning, we're very pleased with our holiday results, including strong sales and earnings growth and in our North American Retail businesses. Our performance clearly demonstrates the strength of our franchise, our broad and diversified product platform and our multichannel international distribution model. Beyond the top line, we were also very pleased with our high level of profitability and substantial cash generation. In addition, we made continued progress against our key global business initiatives, including expanding our share in the growing North American bag and accessory market, increasing our international presence, leveraging our heritage in the men's business and expanding our digital presence. We've experienced strong response to our new collections, and our pricing and assortment strategy continues to resonate with consumers worldwide. We're well situated to build upon our leadership position and continue to gain market share. While I will get into more detail about the outlook for the categories and our business shortly, I did want to take the time to review our quarter first. Some key highlights of our second fiscal quarter were: first, earnings per share rose 18% to $1.18 compared with $1 in the prior year; second, quarterly net sales totaled $1.45 billion versus $1.26 billion a year ago, an increase of 15%; third, Direct-to-Consumer sales, which represent over 85% of total sales, rose 17% to $1.3 billion from $1.3 -- from $1.1 billion in the prior year on a comparable basis; fourth, North American same-store sales for the quarter rose 8.8% from prior year, while total North American Direct-to-Consumer sales rose 17%; and fifth, sales in Japan were even to prior year in constant currency and rose 6% in dollars; and finally, we continued to generate very strong sales growth with significant double-digit comps in China. During the quarter, we opened 5 Retail stores and 5 Factory stores in North America, including 2 men's Retail stores and 1 men's Factory store. Thus, at the end of the period, there were 350 Full Price and 157 Factory stores in operation in North America. Moving to Japan. Six locations were opened, including 4 men's locations. At quarter end, there were 184 total locations in Japan with 22 Full Price stores, including 8 flagships, 122 shop-in-shops, 33 Factory stores and 7 distributor-operated travel Retail locations. And in China, we added 9 locations: 8 in the mainland and 1 in Hong Kong, our Nathan Road flagship, which, I might add, is doing very well. At the end of the quarter, there were 80 Coach locations in China, including 12 in Hong Kong, 3 in Macau and 65 locations on the mainland in 28 cities. As we discussed previously, we are building a multichannel distribution model in China, including flagships, Retail stores, shop-in-shops and Factory stores. Indirect sales were even with prior year on a comparable basis at $166 million. Results reflected shipment timing differences from prior year in our international wholesale businesses. Sales for the quarter at Retail and international wholesale locations increased at a double-digit pace, while sales at POS and U.S. department stores were even with last year's holiday quarter. We estimate that the addressable women's U.S. handbag and accessory category rose at a 5% to 10% rate in the holiday quarter, similar to the increase it experienced in the preceding 9 months of the calendar year. At the same time, Coach's women's handbag and accessory sales rose about 12% across all channels in North America during the most recent quarter. In our Direct businesses in North America, handbag and accessory sales rose 15%. Separately, it's worth noting that we saw modest improvement in our customers' outlook to the economy compared to a quarter ago, with about 60% of those surveyed now believing that the U.S. economy is stable or getting better, up from 48%. Her intention to purchase Coach over the next year continues to be strong, with about 2/3 of consumer surveyed noting they probably or definitely would purchase a Coach product in the next 12 months. Our total revenues in North America rose 15%, with our directly operated businesses up 17%, driven by 8.8% in same-store sales increases and new distribution. As noted in our press release, all direct channels benefited from our innovative digital media strategy, spanning our own websites, mobile platform and social media, which enabled customers to purchase wherever they preferred to engage with our brands. Mike will provide additional details around some of these initiatives in just a moment. Fueling these overall strong comp results were similar gains in both store channels, driven by conversion and average transaction size, and continued strength in our e-commerce business. Overall Retail traffic rose with in-store trends consistent with prior quarters, while traffic on coach.com continues to gain momentum. As we've discussed many times, outside of North America, China is our largest geographic opportunity, given the size of the market and the rate of growth. During the quarter, our sales rose again sharply from prior year, fueled by distribution and significant double-digit same-store sales. Clearly, the Chinese consumer has embraced Coach, as evidenced by the excellent comps we're consistently generating and the extremely high repurchase intent among existing customers. Consistent with our strategy of building brand awareness in China, we took a number of important steps during the second quarter. First, we launched an integrated marketing campaign with our international brand ambassador, Gwyneth Paltrow, that included advertising across print, outdoor and the web, as well as the 70th anniversary gala dinner and gallery event in Beijing. Another key components of the campaign were the successful launch of our presence on Sina Weibo, the leading social networking site in China. In December, we also became the first U.S. incorporated company to list on the Hong Kong Stock Exchange. All of these events helped to drive increased awareness for our brands. While Jane will get into more detail on our financials and I will discuss our outlook in some detail, I wanted to give you this recap. Now I'll turn it over to Mike Tucci to discuss our North American Retail business. Mike? Michael D. Tucci: Thanks, Lew, and good morning. Today, I'd like to review what was an excellent holiday season. Clearly, our balanced and more refined handbag assortment continues to drive sustainable growth in North America. There were 3 important productivity drivers within our North American business: overall product performance, our digital strategy and coach.com results and continued progress on our new men's initiative. During the holiday quarter, as always, we maintained a high level of product innovation and distinctive newness, ensuring that we had a steady flow of new product throughout the period. Our strategy to flow more product later in the quarter versus previous seasons was also very successful. To open the second quarter, we brought in Madison, our core holiday collection, completely updated and featuring several new silhouettes. Lindsey, a new style and feature of our holiday ad campaign, was an immediate hit with consumers. Abigail was also a new fashion silhouette and key item. Also new to Madison were the Mini Sophia, the flap carryall and the Caroline Dowel satchel. This was our most fully developed Madison offering, and we saw the highest penetration level for the collection ever, eclipsing its highly successful launch 3 years ago. For November, Poppy was the focus, offered in new styles, including 2 totes, a foldover cross-body silhouette, a hippie and a satchel. Liquid gloss, a soft patent, lightweight fabric with diamond quilting and chain straps brought additional excitement and vibrant color to the collection. We also added some newness to Chelsea, only introduced last fall, with a classic tote featuring chain details at compelling price points. Right before Thanksgiving, we refreshed our offering with updates to Madison and Kristin, along with a new drawstring tote in Chelsea, giving her additional reasons to revisit and repurchase during the key holiday seasons. Our mid-December significant Madison refresh also delivered newness closer to our peak selling period. Of course, we also had a comprehensive assortment of great gifts, from iPad covers to wristlets, and a wide range of items under $100. Our holiday product was supported by a comprehensive marketing plan, which began in mid-November featuring a powerful gifting message. The emphasis of our marketing was product and item-driven across our core categories and other gifting ideas. Our campaign spanned coach.com, social and rich media advertising and compelling print and in-store marketing. Our addition of digital media to select high-profile store windows was a new element to our in-store marketing and was very well-received. Looking forward, we're excited about our spring product initiatives as well. Just last week, we launched an updated Poppy collection with a fresh point of view with several new silhouettes, including the hippie, hobo and the Poppy Willis, which harkens back to classic Willis bag of the '90s. We also introduced a fresh spring palette in Madison. In late February, the focus will be on Kristin, with 4 new styles across multiple fabrications and a beautiful new woven leather concept in soft feminine colors. On the Factory side, our strong results were fueled by a powerful combination of new product introduction with key styles offered at great prices. Our product assortment was also supported by our in-store and direct marketing campaigns. I'd also like to take this opportunity to provide an update on our digital media strategy and the benefits that we're seeing from it. As you know from previous calls, our digital objective in North America is to drive traffic and build brand awareness while maximizing e-commerce opportunities. Some of our key online initiatives are, first, mobile commerce. We launched our mobile commerce platform this past May, and almost 20% of our web traffic came through a mobile device this holiday season. Second, social media. With over 2.7 million Coach fans on Facebook, this social platform continues to evolve in its contribution to our overall brand message and success. Facebook provides us with additional marketing and potential revenue opportunities as we continue to learn how to engage with our customer in this space. Third, Factory online. As mentioned in our last call, in the U.S., we introduced our invitation-only flash-sale site, targeted only towards our most loyal Factory-exclusive consumers. This provides them with the convenience of shopping online while enjoying the same product and value as found in our stores. We're quite pleased with the results of this highly profitable initiative. While this is a snapshot of our North American Retail digital initiatives, clearly, the Internet will continue to increase in importance globally as both a marketing and communication vehicle and a sales driver. We now have a web presence in 20 countries, 3 of which are commerce-enabled, and we welcome several million visitors outside of North America in the quarter. In China, we're continuing to develop our digital programs and capabilities, which include a planned launch of e-commerce. Additionally, as we grow our international database, we're programmatically communicating with our international consumers via e-mail and seeing engagement at the levels we enjoy here in the U.S. We believe in digital and are clearly recognizing the benefits of this growth vehicle. Our intent is to drive further innovation in this channel, both in the near and long term. As we mentioned in our press release, we're also really excited about the results we're achieving in our men's business, which is on track to double again in fiscal year '12 to over $400 million globally. We experienced success in men's across all concepts and store types, including dedicated stores, shop-in-shops, dual-gender locations and expanded assortments in existing stores and across all geographies and channels. In North America, we see men's both -- as both a way to drive productivity in existing stores and a substantial new distribution opportunity. We believe that in this fragmented category where there's no dominant player, Coach has the opportunity to become the market leader. Our approach to growing men's is to create great product, present it in exciting formats, combined with the rigor that we use to understand our consumer and his buying preferences. We also believe based on our surveys that beyond simply taking share, we will actually grow the men's category in North America. In summary, we're excited with the continued progress we've made in improving productivity and our men's initiative. We're feeling great about the spring season, given the current sales trends in our Retail businesses. With that, I'll turn it back to Lew for a discussion of our strategies and opportunities for growth. Lew?

Thanks, Mike. As most of you know, we have talked to 3 overarching growth strategies: first, building our women's business in the North America market; second, leveraging the global opportunity; and third, tapping into the largely growing men's accessory category. A fourth has emerged as a global business driver and was also mentioned by Mike, and that is leveraging the growing power of the digital world. Coach's digital initiatives are an important and effective complementary strategy to our distribution growth as we continue to grow our store base in North America and worldwide. We expect that our square footage globally and across all channels will increase about 14% this year compared to 9% last year. Starting in North America, we will open about 40 new stores for this year, including the 21 opened in the first half. The FY '12 opening includes about 15 Full Price and 25 Factory outlets, with about half being dedicated men's locations. In total, we expect North American square footage growth of about 10% to 11% this year driven by men's. Turning to China. This year, we're accelerating new store openings with about 30 locations planned or, at least, an additional 15 for the balance of the fiscal year, with the vast majority on the mainland. Virtually all of these openings will be dual-gender stores due to the size of the men's opportunity. Given the continued strength we're experiencing in China, we remain confident that we will achieve at least $300 million in sales during the current fiscal year. In Japan, spending has remained stable after the first 2 quarters of volatility in the post-earthquake and tsunami period. Our focus continues to be on gaining market share, notably in the men's business. During FY '12, we expect to open about 15 net new locations in Japan or an additional 7 net new stores for the balance of the year, nearly all of them dedicated men's locations. In total, we anticipate that net square footage growth in Japan will increase by about 10% this year compared to 3% in FY '11. Consistent with our strategy of directly operating select Asian markets, at the beginning of this month, we successfully transitioned our Domestic Retail businesses in Taiwan, which has about 25 locations and generates about $50 million of annual sales at Retail to Coach's direct control. This follows our acquisition of the Singapore business last summer and will be followed by the acquisition of the Malaysia Domestic Retail operations next July. It's important to note that these acquisitions allow us to leverage the investment we've already made in the region, utilizing the infrastructure created over the last few years, including our Asia shared services center and the Asian distribution center. In addition, we find that these stores experience a significant improvement in productivity when they become directly managed, as we control the total brand experience. Outside of our directly operated markets, we continue to have driving distributor-run businesses in other countries. During FY '12, we expect to open about 35 net new international wholesale locations, expanding to new markets, including Brazil, Vietnam and Kuwait. We're also pleased to announce other distribution agreements for Latin America, initially including Colombia, Venezuela, Panama and Chile, and to Indonesia, where the first store's opening next year. Touching on Europe, we are building a foundation for long-term growth. First, in the U.K., we are beginning to build our multichannel model. Today, we have 3 stores, all opened in the last 12 months, including a mall store in Westfield, our new Bond Street flagship and a Factory store. We will be opening our second London flagship on Regent Street this spring. Importantly, we are gaining traction in this market as the U.K. consumer is embracing Coach and a majority of our business is coming from local customers. And second, in France, where we have partnered with Printemps, our key Boulevard Haussmann women's and men's shop-in-shops are performing well with the global tourist, as we continue to grow our brand awareness with the Parisian shopper. In closing, we're confident that our 4 overarching growth strategies will continue to drive our business at a double-digit pace. At this time, I would like to turn it over to Jane Nielsen, our CFO, for further detail on our financials. Jane?

Thanks, Lew. Lew and Mike have taken you through the highlights and strategies. Let me now take you through some of the important financials of our second quarter results. As we mentioned, our quarterly revenues rose 15%. Our Direct-to-Consumer, which represents over 85% of our business, was up 17%, and our Indirect business was even with last year due to shipment timing into international wholesale accounts. Earnings per share for the quarter increased 18% to $1.18 as compared to $1 in the year-ago period as net income rose to $347 million from $303 million. On a non-GAAP basis, our operating income totaled $521 million in the second quarter, up 15% from $453 million in the same period last year. Operating margin in the quarter was 36% compared to 35.9% in the year-ago period. In the second quarter, gross profit rose 14% to $1.05 billion, up from $915 million a year ago, and gross margin rate remained strong at 72.2% compared to 72.4% the prior year. As expected, we showed a continued sequential improvement in the year-over-year variance. Moving to expenses. We were pleased that we were able to gain modest leverage in the holiday quarter, which is our toughest quarter to do so. Specifically, on a non-GAAP basis, SG&A expenses as a percentage of sales improved from the prior year level in the second quarter and represented 36.2% of sales versus 36.5%. As mentioned in our press release, during the second quarter, we recorded certain items. They included the onetime effect of a reevaluation of deferred tax balances due to a change in the Japanese corporate tax laws and the favorable completion of a multiyear pricing agreement with Japan. Taken together, they yielded a substantially lower tax rate of 30.4% for the quarter, which decreased our tax provision by $12 million. As a result, we made a contribution of $20 million to the Coach Foundation, increasing SG&A expenses by that amount and precisely offsetting the effect of the onetime tax benefit to net income and earnings per share. Moving on to the balance sheet. Inventories at quarter-end were $429 million, up 17% from the end of last year's Q2 and consistent with our sales growth. This inventory level allow us to support 31 net new North American stores, 13 net new locations at Coach Japan and 23 additional Coach China stores from the year-ago period as well as the acquired stores in Singapore and Taiwan and our men's initiative. Further, it will support strong underlying business trends, enabling us to maximize sales this spring. Cash and short-term investments stood at $1.1 billion as compared with $940 million a year ago, despite repurchases of over $900 million worth of Coach common stock in the interim 12 months. During the second quarter, we repurchased and retired 4.8 million shares of our common stock at an average cost of $62.48, spending a total of $300 million, taking our first half total to about $360 million. At the end of the quarter, about $600 million remained on our current repurchase authorization. Net cash from operating opportunities -- activities in the second quarter was $604 million compared to $408 million last year during Q2. Free cash flow in the second quarter was an inflow of $555 million versus $382 million in the same period last year. Our CapEx spending was $39 million versus $26 million in the same quarter a year ago. Consistent with our previous expectations and reflective of our global growth initiatives, CapEx for this year will be in the area of $200 million, driven primarily by the opening of new stores across all geographies and investments in technology necessary to enable our expansion. We were very pleased to once again report these strong financial results. And as Lew and Mike said, we're well positioned for the rest of the fiscal year. To elaborate, first, we expect to achieve double-digit sales growth with earnings per share growth ahead of the top line. Our sales will be driven in part by at least mid-single-digit comp sales in North America for the second half of the fiscal year. Second, as we said before, we expect our second half gross margin to improve over last year as we anniversary increased sourcing costs. Therefore, we anticipate the gross margin for FY '12 will be essentially level with prior year. Third, on SG&A, we expect our developed businesses to continue to deliver leverage while we also continue to invest in global growth for the future. Fourth, we are committed to delivering an operating margin similar to what we've generated over the past 2 years, at about 32%. And fifth, our tax rate is still likely to be in the area of 33% for the remainder of the year. Before we open it up for Q&A, I want to echo Lew's earlier words. This was an excellent quarter for Coach. Clearly, our holiday results bode well for the future, and we're confident that we will continue to deliver very strong sales and earnings gains over the balance of the fiscal year and beyond. Thank you for participating in our conference call today. And now Lew, Mike, Andrea and I, joined by Jerry Stritzke and Victor Luis, will take some questions, which will be followed by a brief comment from Lew.

[Operator Instructions] Our first question today is from Bob Drbul with Barclays. Robert S. Drbul - Barclays Capital, Research Division: The question I have is on the men's. You talked about a lot of the growth and a lot of drivers for the growth. You talked about the $400 million for FY '12. Can you update us on what you think the long-term opportunity is for that business and the timing of it?

Sure. Well, the first word that comes to mind is it's boundless. But to actually try to dimensionalize it, as Mike said, we're experiencing success wherever we're offering a comprehensive assortment of men's, again, across all geographies and all channels, and it's extremely exciting for us. Second, men's spending globally represents about 15% of the global luxury spend. For Coach, with our sales expected as -- men's sales expected at $400 million, that will represent about 8% of our overall sales for this fiscal year. We believe that we can very comfortably get to our rightful share of at least 15% of a larger business over the next few years. So we think $1 billion is well within reach over the next 3 to 5 years, and that's our internal mantra. Robert S. Drbul - Barclays Capital, Research Division: Great, Lew. And the other question I have, just a quick follow-up, did you guys give ticket and traffic for North American comps?

I'm sorry, Bob, your question? Robert S. Drbul - Barclays Capital, Research Division: Can you give ticket and traffic for the North American comps? Michael D. Tucci: Tickets.

And traffic. Michael D. Tucci: Tickets in North America from a comp standpoint was up slightly. And traffic, as we said, was very consistent with prior quarters. Overall traffic was greater when you factor in across all channels. Our store traffic in Factory and Full Price stores sequentially improved from Q1, which was a benefit to us. However, it was still down in Full Price and up in Factory.

Our next question is from Neely Tamminga with Piper Jaffray. Neely J.N. Tamminga - Piper Jaffray Companies, Research Division: Let me add my congratulations to the whole team as well. I also have a question, very specific question on your mantra on your men's business. Lew and Mike Tucci, maybe if you guys could give us some explanation in terms of the rollout on the North American side. It's been our understanding that you guys are actually pretty under-penetrated within the North American Retail footprint. I'm just wondering, more specifically, what kind of the game plan is maybe as we head into Father's Day this year in terms of getting more products in the stores. Michael D. Tucci: Sure. There are a lot of components to that. And I think what we plan to do with the investor community is share a very detailed global view of our approach to men's expansion for FY '13. But let me give you some grounding and some headlines on what we're doing. First, we're very pleased with the results of our freestanding men's stores. There are a handful of them out there. They are great learning platforms for us, and the performance in those stores is excellent. The larger opportunity that we see is actually expanding our men's business in existing Retail locations through shop-in-shops, what we call concept shops and, in fact, selling more men's products in all stores globally. We're doing this through increased presentations through actually selling our product via our website, enabled in-store through laptops. There's a very broad opportunity for us to sell more product in men's. Where I see us going in Father's Day is several new men's shops which will be installed this spring. The opening of our Pentagon dual-gender location, which will happen in May. That's a women's and men's side-by-side location. And as we enter FY '13, a significant rollout of men's shops in existing Retail locations. So where we see the growth is driving productivity in our existing stores, taking advantage of the men's momentum that we're seeing through CBSR, our Coach By Special Request program, as well as growing freestanding men's stores. Victor, if you want to add little bit on the global side, what we're doing in Asia?

Sure. When we look at -- Lew had mentioned in his remarks that the men's opportunity globally is approximately 15% of the global premium handbag and accessories market, which is at about $28 billion. The Asia opportunity today is about 25% of a $12 billion market. Of that, Japan is approximately $4.4 billion; China at $3.2 billion, including Hong Kong, Macau, including duty-free; and then the rest in -- the rest of Asia. Japan, the men's penetration is at about 25%, and we're still very much in a rollout stage. Today, we have 14 dedicated men's locations, 7 in Full Price, 7 in Factory. As many of you know, most of our distribution in Japan is within department stores where we are on the women's handbag floor, and there, the opportunity will be to increase distribution with the men's floors, which we are now commencing. And initial results have been quite promising. China is really a massive opportunity for us. When we look at mainland China, for many of our competitor brands, men's represent 50% or more of their sales. And there, of our 65 mainland China locations today, 28 of them are dual-gender locations where we have, basically, stand-alone men's presences. Of the 30 locations we are opening this fiscal year, practically all of them will be dual-gender locations. So we're starting with -- very early stages, as basically a global men's and women's brand. And we are seeing truly terrific results with very early stages, 25% to 30% penetration for men's in these locations at a point where we really still don't have an awareness as a men's brand. As many of you know, in the past, we've discussed our brand awareness, our unaided brand awareness at 16%, up from 8% last year, and we're really just starting in the men's space. So to achieve these penetrations this early is truly exciting and bodes well for the future. And in the rest of Asia, we're still at our very early stages. We have, of course, as Lew announced, just taken back our Singapore business and Taiwan only a few weeks ago. And there, we are commencing the men's rollout as well, and that -- and expect to see similar penetrations to what we're seeing in China in the medium term, in the next 2 to 3 years.

Our next question is from David Schick from Stifel, Nicolaus. David A. Schick - Stifel, Nicolaus & Co., Inc., Research Division: And let's congratulate you by asking the third question in a row about men's. Just -- the growth is so dynamic, and I'm sure we all have these questions because it sounds like we're going to be talking about it for a long time. Maybe some other metrics we could get into. Gifts versus self-purchase, is it bringing in a new customer or is it a customer making a different trip? Is there a different proportion of gifts versus self-purchase for the men's as you're seeing it? This is just shorter term, but the comp versus distribution growth, just in the number you're talking about, the $400 million. And then lastly, just anything you can tell us about ticket just to sort of round out our view a little bit more again about the characteristics of the men's business.

Sure. Well, first, gift versus purchased, it varies a lot by market. What we're-- and by channel. At present, I would say it's -- in North America, a slightly greater proportion of men's is for gift than self-purchased, we estimate self-purchase. Among women -- I'm sorry. Gifting for women is about 20% of our sales. I would estimate men's might be 30%. It's obviously a great marketing opportunity for us, and you'll see us just distorting a good portion of our marketing globally, both on the Internet and in traditional media, as well as social networking towards men's to both build awareness and to encourage gifting. And in terms of existing consumers versus new consumers, we are in North America attracting a higher rate of new customers into the franchise through men's than we are women's. But that should be expected, because the women's business is, of course, extremely developed with growth opportunities ahead. But in men's, it's early days. In terms of distribution growth versus same-store sales growth, what I -- I am being cautioned not to provide much detail. What I would say is that we are achieving significant double-digit same-store growth in the men's area. Michael D. Tucci: So let me come in on this one. And what we understand is that the concept is prudent. We have enough exposure in the marketplace and enough experience with consumers to know that the concept is a very proven concept and the category is very real. We need a little more time to very tactically break out the opportunity from a distribution standpoint: our digital opportunity with our men's website; our global opportunity in terms of store footprint, both the existing opportunity in large-format flagship stores to add men; the new opportunity to develop men's and women's dual-gender stores; and how we can provide a men's presence in all stores where we trade that are currently women's stores is something we need to sort out. So we need to really work through the entire fleet in Full Price in North America alone. That's 350 stores. We're doing that work today, and we have traction in each of the formats, which gives us a path for growth. On the product side, what's interesting is that as we expand this category, it's not all about bags. Bag is still the anchor, but we're seeing very strong response to Accessory, to lifestyle category, to emerging categories like by footwear, outerwear, small travel pieces. So we believe that this concept hangs very well on its own and drive very strong productivity metrics comparable to our women's business in terms of ticket size and from a margin structure very comparable as well.

You probably heard more about men's just now than you wanted to.

Our next question is from Christine Chen with Needham & Company. Christine Chen - Needham & Company, LLC, Research Division: Wanted to ask in women's, handbags, $400 and up. Was curious if you were able to increase the penetration for the holiday season. And I'm wondering what your outlook is for that part of the handbag business going forward for the rest of the year. Michael D. Tucci: Sure. Our overall handbag performance was actually very strong. Comps were positive. We saw growth there. Our mix in handbag, average unit retail was about flat for the quarter, and that was very intentional around our gifting strategy and a mix strategy where some of our core price points at $298 and $198 were extremely successful. The handbag performance at over $400 is actually down from prior year, although our outlook going forward would suggest that, that is still a growth opportunity for us.

Our next question is from Barbara Wyckoff with CLSA. Barbara Wyckoff - Credit Agricole Securities (USA) Inc., Research Division: I'm more -- I'd like to have some more color on China. What are they selling versus the other markets? You talked about men's and women's, which is fine. How many stores do you think you can have in China in the next 3 to 5 years? And then is there a chance that travel Retail would be a candidate for you to take in-house?

Victor?

Sure. First, maybe we can talk a little bit about the distribution. We are, as Lew mentioned in his opening remarks today, 80 doors, with the vast majority of those, 65, on the mainland. When we look at the opportunity, it is truly boundless. And, Barbara, you know well the socio-demographic socio-economics of the market, 1.3 billion population, of which 50% is urban and continuing to urbanize, already 120 cities with a population of 1 million or more. We are today only in 28 of those cities. And with our broad collection from a style perspective as well as our broad price points, we're able to much more easily than traditional luxury brands, of course, to go into the second- and third-tier cities, where we're seeing success. Of course, we are also seeing a rapidly growing middle class, and we're not seeing many limitations from a distribution perspective. When we start looking at Coach's strategy towards a multichannel -- towards multichannel rollout, China really fits nicely. We have approximately 600 department store doors today in China, of which already over 110, 120 are doing incredibly well in the imported luxury cosmetics space, which serves as a barometer for us. Malls are continuing to develop nicely, both in the Full Price as well now an increasing rollout of Factory outlet malls, of course, which we know well. Looking at the rollout for this year, as we've announced, 30 doors, and we see us continuing at that pace for the foreseeable future. I think the second question was on products, and there, we really don't see a tremendous difference globally, quite frankly, in terms of our collection. Madison, Poppy, Kristin are truly global collections for us. The difference and what truly differentiates Coach from many of our competitors is that we have a group of very talented merchants in each of our markets. We're supported by a truly -- a superb consumer insight team. We're constantly listening to our consumers, and that allow us to tweak our collections, whether it be from color, size, shape, style, and, therefore, maximize the opportunity in each of our markets. But the difference, as I touched to earlier, of course, in China is really the men's opportunity, and we're starting out from the beginning in these very early stages as a dual-gender brand. Whereas we have been 3, 4 years earlier opening 1,000- to 1,500-square-feet locations that were basically women's only locations. Today, we're targeting 2,000- to 2,500-square-feet on average. Locations with a men's and women's entrance in most cases and getting truly terrific results in seeing our products resonate, even though we still have very low awareness levels at these early days. Touching on duty-free, and specifically, we're looking at, I would say, 2 parts of the travel Retail piece. Of course, for China, the big opportunity is, outside of China, approximately half of Chinese luxury sales occur outside of China. We're very active in this, developing our distribution in Asia, and we're seeing tremendous benefits from that, of course, within China itself, in Hong Kong and Macau, and beginning to see some of that in other markets as well. Within China domestically at the airports, there will be opportunities, both in the duty-paid as well as in the duty-free spaces as airport authorities begin to put the infrastructure in place. It's something we're investigating. We haven't made a move in that space at the moment, because there's so much opportunity in the urban areas themselves that we're going after, but it is something that we're paying attention to. Barbara Wyckoff - Credit Agricole Securities (USA) Inc., Research Division: Great. Can I just ask one more question about the China outlets? How many malls are there now? How many are you in?

We, today, are in 9 malls, including Hong Kong and Macau, 7 in mainland China. Only a few months ago, I attended a conference with global Factory outlet developers in the city of Suzhou, where there were talk of 100 or so outlets being developed in the next 5 to 10 years. So we expect the channel to develop rather quickly and to be a substantial opportunity.

[Operator Instructions] Our next question is from Randy Konik with Jefferies. Randal J. Konik - Jefferies & Company, Inc., Research Division: First, Lew, how do you think about the U.S. consumer for 2012 versus 2011? What's your thoughts there? And then I guess, Lew or Jane, if we kind of think about the various moving pieces of increasing Asian -- increasing China as a percent of sales, increasing men's as a percent of sales and then taking back these various Asian geographies, how do we think about the long-term operating margin structure for the company? They're very consistent, in the low 30s the last couple of years. How can we think about where that -- those operating margins end up over the next few years?

Firstly, Randy, as I mentioned, the consumer sentiment has really improved over the last 90 days. And actually, 60% of consumers now in North America believe the economy is stable or improving, and that's up from 48% just 3 months ago. In -- it's also evident that consumers are beginning to borrow more and save somewhat less. Savings rates, as you know, are down to about 3.5% from 5%. And year-on-year non-mortgage borrowing is increasing, which says that the consumers are more encouraged than they -- at any point than they have been in the last 6 to 12 months. So we feel, barring any unexpected event, that the consumer sentiment will continue to be positive. Obviously, the recovery is very uneven. While unemployment is still at a terribly high rate of 8.5%, unemployment for college graduates over the age of 25, who is our primary consumer, is only in the mid-4 range. So we are benefiting from our positioning, which is to offer excellent product at accessible and affordable price points, and our very diversified consumer base is responding well. So guardedly optimistic.

And I think as we look at the components of operating leverage, I think that the net -- long-term positives that we have are: our growing international business driving overall operating margin as it continues to grow and achieve scale, our men's business as it grows internationally, achieves scale, will also be a positive operating driver and will continue to drive productivity initiatives and efficiency initiatives that we've delivered over time to keep our high operating profit and to continue to invest in growth. As we say -- as you know, as we've talked before, as we take over markets like Taiwan, Singapore and Malaysia, there is -- we -- there is the initial few quarters as we purchase the inventory at wholesale rates and we cadence our flow of merchandising and take over the store operations. Over time, those become very good businesses for us. But we have the first few quarters of transition before their operating margin stabilizes and becomes a net benefit for us. Randal J. Konik - Jefferies & Company, Inc., Research Division: Is it -- can you hear me?

Yes.

Yes. Randal J. Konik - Jefferies & Company, Inc., Research Division: I'm sorry. Is there just a number we could look towards? Is there like a 35 number or anything like that you'd want to kind of...

Randal, we don't have an aspirational goal. You know us well. We drive to build a lasting franchise and give our shareholders an excellent return. And it's -- and obviously, we're working in all areas to maximize operating income consistent with building a lasting franchise.

Our next question is from Brian Tunick with JPMorgan. Brian J. Tunick - JP Morgan Chase & Co, Research Division: Questions, Lew, on the gross margins here. I mean, it still sounds like we're hearing that double-digits labor cost increase in China. So just trying to understand sort of where is your gross margin improvement coming from. If you can just give us little more color there. Is it channel mix? Is it all relief and sourcing, and how that's happening? And then on the new headquarters that we've been hearing about, can you maybe talk about any cash flow implications from that, and does that change -- or your commitment towards your continued share repurchases or dividends? Maybe just talk about the cash flow and your minimal cash balance requirements.

Sure. Let me ask Jerry Stritzke to jump in here.

On the sourcing opportunities, I mean, we were very pleased with the job that our team has really done trying to mitigate some of those challenges. And it's hard work that we've done, a lot of work trying to get raw material sources in place to help offset -- working on where we're doing our manufacturing, how we're doing it. But it is still a pressure that we have to cope with that, push it the wrong way, and it creates some pressure on our margin. We're forcing in that as our International business does grow. Particularly in Asia, that's a plus. But then there's -- we have puts and takes. As we expand the other markets we get, we go the other direction. So we are really striving to kind of -- to lose point to hold the ground. But there are puts and takes, and we fight that battle every other time. And we've talked, I think, before about our kind of sourcing activities in Vietnam, India. We're actually continuing to expand that and aggressively look at that. We've had some great successes that have worked to our benefit. I think it's a reflection of the talent we have offshore, which we think is unique to Coach, to really build manufacturing capabilities. And our hands-on activity do that in the way that ensures that we continue to deliver high-quality product.

And in the next quarter or 2, as is our practice, we'll come back and talk to you about our next year's outlook on gross margins. Brian J. Tunick - JP Morgan Chase & Co, Research Division: Okay. And how about the headquarters and the cash flow thoughts?

Yes, I think that what you've seen in our Q2 repurchase activity, we remain committed to 2 things. One is investing in our business to continue to drive long-term growth and return, and the second is we remain committed to returning capital to shareholders. We're doing that through a combination of dividends, which you've seen increase over time since our initiation, and through stock repurchases. And I don't anticipate that our building would stop that in any meaningful way.

Thank you, Jane.

Thank you all for joining us on our conference call today. It is now 9:30. The market's about to open. So as is our tradition, I'd like to turn it back to Lew for a few closing words. Lew?

Well, thank you, Andrea. Obviously, a lot of good discussions around men's; China; our stabilizing gross margins, which I think is a testimony to the nimbleness of our team; the digital world is really powerful and is now for us an overarching strategy. So we do feel good about where we are, and we feel excited about our prospects. So have a good day, everybody. Thank you.

This does conclude the Coach earnings conference. We thank you for your participation.