COACH INC, S-1, 2000-06-16

COACH INC
S-1, 2000-06-16

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 2000
REGISTRATION NO. 333-
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--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------

COACH, INC.

(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C> <C>
MARYLAND 3171 52-2242751
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Organization) Industrial Identification Number)
Classification Code Number)
</TABLE>

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COACH, INC.
516 WEST 34(TH) STREET
NEW YORK, NY 10001
(212) 594-1850

(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)

------------------

CAROLE P. SADLER, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
COACH, INC.
516 WEST 34(TH) STREET
NEW YORK, NY 10001
(212) 594-1850

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)

------------------

COPIES TO:

<TABLE>
<S> <C>
CHARLES W. MULANEY, JR., ESQ. KEITH S. CROW, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) KIRKLAND & ELLIS
333 WEST WACKER DRIVE 200 EAST RANDOLPH DRIVE
CHICAGO, IL 60606 CHICAGO, IL 60601
(312) 407-0700 (312) 861-2000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
----------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, par value $.01 per share...................... $140,000,000 $36,960
</TABLE>

(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(o) of the Securities Act.
----------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION. DATED JUNE 16, 2000.
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
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Shares

[LOGO]

Common Stock
-------------

This is an initial public offering of shares of common stock of Coach, Inc.
All of the shares of common stock are being sold by Coach.

Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $ and $ . Coach intends to list the common stock
on the New York Stock Exchange under the symbol "COH."

SEE "RISK FACTORS" ON PAGE 6 TO READ ABOUT FACTORS YOU SHOULD CONSIDER
BEFORE BUYING SHARES OF THE COMMON STOCK.

------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

------------------

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price............................. $ $
Underwriting discount..................................... $ $
Proceeds, before expenses, to Coach....................... $ $
</TABLE>

To the extent that the underwriters sell more than shares of common
stock, the underwriters have the option to purchase up to an additional
shares from Coach at the initial public offering price less the
underwriting discount.

------------------

The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.

GOLDMAN, SACHS & CO.

------------

Prospectus dated , 2000.
<PAGE>
PROSPECTUS SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY AND THE COMMON STOCK BEING SOLD IN THIS
OFFERING AND OUR HISTORICAL FINANCIAL STATEMENTS AND NOTES TO THOSE STATEMENTS
INCLUDED ELSEWHERE IN THIS PROSPECTUS.

OUR BUSINESS

We are a leading designer, producer and marketer of high-quality, modern,
American classic accessories that complement the diverse lifestyles of
discerning women and men. Founded in 1941, Coach is one of the best recognized
leather goods brands in the U.S. and is enjoying increased recognition in
targeted international markets. We believe the prominence of the Coach brand
results from the unique combination of our original American attitude and
design, our heritage in fine leather products, our superior product quality and
durability and our commitment to customer service. Net sales were
$507.8 million for fiscal year 1999 and $427.2 million for the first 39 weeks of
fiscal 2000. Operating income before reorganization costs was $26.6 million for
fiscal year 1999 and $47.6 million for the first 39 weeks of fiscal 2000.

Our primary product offerings include handbags, men's and women's
accessories, business cases, luggage and travel accessories, time management
products, leather outerwear, gloves and scarves. Together with our licensing
partners, we also offer watches, footwear, furniture and eyewear with the Coach
brand name. Our products are sold through a number of direct to consumer
channels, including our:

- 106 U.S. retail stores;

- direct mail catalogs;

- e-commerce website, COACH.COM; and

- 63 U.S. factory stores.

Our direct to consumer business will represent approximately 64% of our
total sales in fiscal year 2000. Our remaining sales are generated through a
number of indirect channels, including:

- approximately 1,400 department stores and specialty retailers in the U.S.;

- approximately 175 international department stores, retail stores and duty
free shops in 18 countries; and

- our corporate sales programs.

Our net sales grew at a compound annual growth rate of approximately 32%
from $19.0 million in 1985, when we were acquired by Sara Lee Corporation, to
$540.4 million in fiscal year 1997. In fiscal years 1998 and 1999, we
experienced sales declines of 3.4% and 2.8%, respectively, our first
year-to-year sales declines since becoming a part of Sara Lee. These declines
were primarily the result of changes in consumer preferences from leather to
mixed material and non-leather products, which some of our competitors offered,
and diminished demand for our products due to the economic downturn in Asia.
During fiscal years 1997 through 1999, we also experienced reduced
profitability.

During this period, we embarked on a fundamental transformation of the Coach
brand. We built upon our popular core categories by introducing new products in
a broader array of materials and styles and we introduced new product
categories. In 1999, we began renovating Coach retail stores, select U.S.
department store locations and key international locations to create a modern
environment to showcase our new product assortments and reinforce a consistent
brand position. Over the last three years, we also have been implementing a
flexible, cost-effective sourcing and

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manufacturing model that allows us to bring our broader range of products to
market more rapidly and efficiently.

Primarily as a result of our repositioning initiatives, our sales increased
9.7% and our operating income before reorganization costs increased 60.8% in the
first 39 weeks of fiscal 2000, compared with the same period in 1999.

OUR STRENGTHS

We have developed a number of strengths that we believe create significant
competitive advantages. These include:

- an established and growing brand franchise and a loyal consumer base,
reinforced by years of investment in consistent marketing communications;

- distinctive product attributes, including a reputation for product
quality, durability, function, premium leather and classic styling;

- comprehensive internal creative direction that defines our image, delivers
a consistent message and differentiates Coach from other brands;

- a well-developed multi-channel presence, allowing us to serve our
customers wherever they choose to shop; and

- recognition as a desirable resource for both personal and business
gift-giving occasions.

OUR STRATEGIES

Based on our established strengths, we are pursuing the following strategies
for future growth:

ACCELERATE NEW PRODUCT DEVELOPMENT. We are accelerating the development of
new products, styles and product categories that support our image as a broader
lifestyle accessories brand. This strategy includes introducing seasonal
variations of successful styles in colors and fabrics that reflect current
fashion trends, updating our core collections and launching new collections,
product additions, line extensions and product categories ourselves or through
arrangements with licensing partners.

MODERNIZE RETAIL PRESENTATION. We are modernizing our brand image by
remodeling all Coach retail stores, key international locations and select U.S.
department store locations to create a distinctive environment to showcase our
new product assortments. Our renovated retail stores have demonstrated
significantly higher comparable store sales growth relative to unrenovated
stores. We expect that all of our retail stores will reflect the new store
design by June 2003. Approximately 80 key international locations will be
renovated by June 2001 and approximately 100 leading U.S. department store
locations will be renovated by December 2002. We have recently expanded and
rebuilt our New York and San Francisco flagship stores in our modern format. We
also expect to expand 15 key retail locations over the next three years.

INCREASE U.S. RETAIL STORE OPENINGS. We opened eight new U.S. retail stores
in fiscal year 2000. Over the next three years, we plan to expand our network of
106 retail stores by opening approximately 50 new stores located primarily in
high volume markets. We believe that we have a successful retail store format
that reinforces our brand image, generates stronger sales per square foot and
can be readily adapted to different location requirements.

2
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opportunity because they spend substantially more on handbags than
U.S. consumers on a per capita basis.

IMPROVE OPERATIONAL EFFICIENCIES. We have upgraded and reorganized our
manufacturing, distribution and information systems over the past three years to
allow us to bring new and existing products to market more efficiently and
cost-effectively. In the first 39 weeks of fiscal 2000, our gross margin
increased to 59.4% from 55.4% during the same period in fiscal 1999. We intend
to continue to increase efficiencies in our operations through initiatives that
include streamlining product introduction, implementing a new product
development process and timeline, integrating computer-assisted design into the
design and development process and expanding our East Asian sourcing
capabilities.

PROMOTE GIFT PURCHASES OF OUR PRODUCTS. We are further promoting Coach as
an appealing resource for gift-giving occasions by developing new products
well-suited for gift selection. In addition, our marketing communication
efforts, including advertising, catalog mailings and outbound e-mails, are timed
to reach consumers before important holidays throughout the year.

CAPITALIZE ON GROWING INTEREST IN E-COMMERCE. Our on-line store, COACH.COM,
has been visited by 1.8 million consumers since its launch in October 1999, and
provides another attractive sales channel. We believe we are well-positioned to
execute our e-commerce strategy given our 20 years of experience in order
fulfillment and remote retailing through our direct mail catalogs.

OUR RELATIONSHIP WITH SARA LEE

We were founded in 1941, and have been owned by Sara Lee Corporation since
1985. After the completion of this offering, Sara Lee will own approximately %
of the outstanding shares of our common stock, or approximately % if the
underwriters fully exercise their option to purchase additional shares. Sara Lee
currently is planning to effect an exchange or other distribution of its shares
of our common stock within 18 months of this offering, although the timing of
the exchange or other distribution has not been finally determined. Sara Lee is
not obligated to complete any exchange or other distribution and we cannot
assure you as to whether, when or how it will occur.

Before the completion of this offering, we will enter into agreements with
Sara Lee related to the separation of our business operations from those of Sara
Lee. Under these agreements, Sara Lee will transfer to us the assets and
liabilities which relate to our business, including our allocable portion of
Sara Lee indebtedness in the form of a note payable to a Sara Lee subsidiary.
The agreements will provide for various interim and ongoing relationships
between us and Sara Lee.

The agreements regarding the separation of our business operations from
those of Sara Lee are described more fully in the section entitled "Arrangements
Between Sara Lee and Coach" included elsewhere in this prospectus. The terms of
agreements are being negotiated in the context of a parent-subsidiary
relationship and may be more or less favorable to us than if they had been
negotiated with unaffiliated third parties. The assets and liabilities to be
transferred to us are described more fully in our financial statements and notes
to those statements that are also included elsewhere in this prospectus.

3
<PAGE>
THE OFFERING

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<S> <C>
Common stock offered................................. shares

Common stock to be outstanding immediately after this
offering........................................... shares

Common stock to be held by Sara Lee immediately after
this offering...................................... shares

Use of proceeds...................................... The estimated net proceeds from this offering
of approximately $ million will be used to
repay a portion of the note payable to a
subsidiary of Sara Lee to be assumed by us in
connection with our separation from Sara Lee.

Proposed New York Stock Exchange symbol.............. COH
</TABLE>

This information is based on shares outstanding immediately
prior to this offering, all of which are owned by Sara Lee. Unless we
specifically state otherwise, the information in this prospectus does not take
into account the issuance of up to shares of common stock that the
underwriters have the option to purchase from us. If the underwriters fully
exercise their option to purchase additional shares, shares of common
stock will be outstanding after this offering and Sara Lee will hold of
those shares.

The number of shares of our common stock to be outstanding immediately after
the offering does not take into account approximately shares of our
common stock reserved for issuance under our stock plans. At the time of the
offering, we intend to grant options to purchase up to approximately
shares of our common stock at the offering price to some of our directors,
officers and employees. In addition to the common stock reserved for issuance
under our stock plans, we intend to offer to selected executive employees
options to purchase up to an aggregate of shares of our common stock,
subject to the surrender and cancellation of previously granted options to
purchase Sara Lee common stock.
------------------------

We incorporated in Maryland on June 1, 2000 as Coach, Inc. Our executive
offices are located at 516 West 34(th) Street, New York, New York 10001; our
telephone number is (212) 594-1850 and our facsimile number is (212) 594-1682.
We also maintain an Internet site at WWW.COACH.COM. Our website and the
information contained on or connected to our website are not part of this
prospectus or the registration statement of which this prospectus forms a part.

In this prospectus, "Coach," "we," "us," and "our" each refers to Coach and
not to the underwriters or Sara Lee. "Sara Lee" refers to Sara Lee and its
subsidiaries, not including Coach. Coach's fiscal year ends on the Saturday
closest to June 30. Fiscal year 1999 is a 53-week year, while fiscal years 1995,
1996, 1997, 1998 and 2000 are 52-week years.

COACH, COACH AND LOZENGE design, COACH AND TAG design, "C" SIGNATURE FABRIC
design and other trademarks of Coach appearing in this prospectus are the
property of Coach.

4
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SUMMARY FINANCIAL DATA

The following tables present our summary financial data. The data presented
in these tables are from "Selected Financial Data" and our historical financial
statements and notes to those statements included elsewhere in this prospectus.
You should read those sections and the section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for a further
explanation of the financial data summarized here. The historical financial
information may not be indicative of our future performance and may not reflect
what our financial position and results of operations would have been had we
operated as a separate, stand-alone entity during the periods presented.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
---------------------------------------------------------------- -------------------------
JULY 1, JUNE 29, MARCH 27, APRIL 1,
1995 1996 JUNE 28, JUNE 27, JULY 3, 1999 2000
(UNAUDITED) (UNAUDITED) 1997 1998 1999 (UNAUDITED) (UNAUDITED)
----------- ----------- ---------- ---------- ---------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED AND COMBINED
STATEMENT OF INCOME DATA:
Net sales.......................... $395,021 $512,645 $540,366 $522,220 $507,781 $ 389,502 $ 427,232
Gross profit....................... 235,696 300,668 313,280 286,708 281,591 215,691 254,033
Selling, general and administrative
expenses......................... 178,221 238,621 269,011 261,695 255,008 186,071 206,399
Reorganization costs............... -- -- -- -- 7,108 7,108 --
Operating income................... 57,475 62,047 44,269 25,013 19,475 22,512 47,634
Net income......................... 36,969 42,860 32,037 20,663 16,715 19,238 32,169
Pro forma as adjusted net income
(1)..............................
Net income per share--basic........
--diluted........................
Unaudited pro forma as adjusted net
income per share--basic..........
--diluted........................
Shares used in computing unaudited
pro forma as adjusted net income
per share--basic.................
--diluted........................
</TABLE>

<TABLE>
<CAPTION>
APRIL 1, 2000
----------------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)
(UNAUDITED) (UNAUDITED)
----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED AND COMBINED BALANCE SHEET DATA:
Working capital............................................. $ 46,387 $ 46,387
Inventory................................................... 100,642 100,642
Receivable from Sara Lee (2)................................ 89,537 --
Total assets................................................ 326,715 237,178
Stockholder's net investment................................ 235,496
</TABLE>

------------------------------

(1) Pro forma as adjusted amounts give effect to the following actions as though
these actions had been taken as of June 28, 1998:

- our assumption, prior to the offering, of $190 million of indebtedness
to a subsidiary of Sara Lee and the resulting reduction in Sara Lee's
equity;

- capitalization of the receivable from Sara Lee in the amount of
$89.5 million into Sara Lee's equity;

- our sale of shares of common stock in this offering at an assumed
initial public offering price of $ per share and after deducting an
assumed underwriting discount and estimated offering expenses payable
by us;

- use of the offering proceeds to repay a portion of the $190 million in
indebtedness and reflection of interest expense on the unpaid balance
of the indebtedness of $ at an assumed market interest rate of %,
resulting in interest expense of $ in fiscal 1999 and $ for
the 39 weeks ended April 1, 2000; and

- the difference in estimated costs for the services to be provided by
Sara Lee under the master transitional services agreement, at a cost of
$1 million per year, from the costs historically allocated to us for
these services, resulting in a net $60 expense in fiscal 1999 and $92
in the 39 weeks ended April 1, 2000.

Upon Sara Lee's exchange or other distribution of our common stock, we will
no longer be permitted to participate in Sara Lee's benefit plans, insurance
plans and working capital funding arrangements. We may face increased costs
for these and other items, such as store leases, following this offering. At
this time, we cannot estimate the amount or timing of these increased costs
and, accordingly, we have not included this amount in the pro forma as
adjusted amounts.

(2) Coach and Sara Lee expect that prior to the offering, the balance on the
receivable from Sara Lee will be capitalized into Sara Lee's investment in
Coach. No cash will be paid or collected by either party.

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RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW AND OTHER
INFORMATION IN THIS PROSPECTUS BEFORE INVESTING IN OUR COMMON STOCK.

RISKS RELATED TO OUR BUSINESS

WE MAY NOT BE ABLE TO GROW OUR BUSINESS AS PLANNED OR MANAGE OUR GROWTH
EFFECTIVELY.

Our future operating results will depend on our ability to implement our
growth strategies and successfully manage a larger business. In fiscal years
1998 and 1999, we experienced a decline in sales as compared to prior years, of
3.4% and 2.8%, respectively. In fiscal years 1997 through 1999, we also
experienced reduced profitability. In response to these declines, we implemented
a number of strategic initiatives to increase demand for our products and
recently we have accelerated these initiatives. The success of each of these
initiatives, alone or collectively, will depend on various factors, including
the appeal of our new designs, products and retail presentation to consumers,
competitive conditions and domestic and international economic conditions. If we
are unsuccessful at implementing some or all of our strategies or initiatives,
our future operating results may be adversely affected.

Successful implementation of our strategies and initiatives will require us
to manage our growth. To manage our growth effectively, we will need to continue
to increase production while maintaining strict quality control and continue to
improve our operating systems to respond to increased demand. We could suffer a
loss of consumer goodwill and a decline in sales if our products do not continue
to meet our quality control standards or if we are unable to adequately respond
to increases in consumer demand for our products.

OUR INABILITY TO RESPOND TO CHANGES IN CONSUMER DEMANDS AND FASHION TRENDS IN A
TIMELY MANNER COULD ADVERSELY AFFECT OUR SALES.

Our success depends on our ability to identify, originate and define product
and fashion trends as well as to anticipate, gauge and react to changing
consumer demands in a timely manner. Our products must appeal to a broad range
of consumers whose preferences cannot be predicted with certainty and are
subject to rapid change. We cannot assure you that we will be able to continue
to develop appealing styles or meet changing consumer demands in the future. If
we misjudge the market for our products, we may be faced with significant excess
inventories for some products and missed opportunities for other products. In
addition, because we place orders for products with our manufacturers before we
receive our wholesale customers' orders, we could experience higher excess
inventories if our wholesale customers order fewer products than we anticipated.

COMPETITION IN THE MARKETS IN WHICH WE COMPETE IS INTENSE AND OUR COMPETITORS
MAY DEVELOP PRODUCTS MORE POPULAR WITH CONSUMERS.

We face intense competition in the product lines and markets in which we
compete. Our products compete with other branded products within their product
category and with private label products sold by retailers, including some of
our wholesale customers. In our wholesale business, we compete with numerous
manufacturers, importers and distributors of handbags, accessories and other
products for the limited space available for the display of these products to
the consumer. Moreover, the general availability of contract manufacturing
capacity allows new entrants easy access to the markets in which we compete,
which may increase the number of our competitors and adversely affect our
competitive position and our business. Some of our competitors have achieved
significant recognition for their brand names or have substantially greater
financial, distribution, marketing and other resources than we have.

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A DOWNTURN IN THE ECONOMY MAY AFFECT CONSUMER PURCHASES OF DISCRETIONARY ITEMS,
WHICH COULD ADVERSELY AFFECT OUR SALES.

Many factors affect the level of consumer spending in the handbag and
accessories industry, including, among others, general business conditions,
interest rates, the availability of consumer credit, taxation and consumer
confidence in future economic conditions. Consumer purchases of discretionary
items, such as our products, tend to decline during recessionary periods when
disposable income is lower. A downturn in the economies in which we sell our
products, such as the economic downturn in Asia in 1997, may adversely affect
our sales.

IF WE LOSE KEY MANAGEMENT OR DESIGN PERSONNEL OR ARE UNABLE TO ATTRACT AND
RETAIN THE TALENT REQUIRED FOR OUR BUSINESS, OUR OPERATING RESULTS COULD SUFFER.

Our performance depends largely on the efforts and abilities of our senior
management and design teams. These executives and employees have substantial
experience and expertise in our business and have made significant contributions
to our growth and success. We do not have employment agreements with any of our
executives or design personnel. The unexpected loss of services of one or more
of these individuals could have an adverse effect on our business. As our
business grows, we will need to attract and retain additional qualified
personnel and develop, train and manage an increasing number of
management-level, sales and other employees. We cannot assure you that we will
be able to attract and retain personnel as needed in the future.

OUR OPERATING RESULTS ARE SUBJECT TO SEASONAL AND QUARTERLY FLUCTUATIONS, WHICH
COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.

Because our products are frequently given as gifts, we have experienced, and
expect to continue to experience, substantial seasonal fluctuations in our sales
and operating results. Over the past three fiscal years, between 34% and 36% of
our annual sales were recognized in our second fiscal quarter, which includes
the holiday months of November and December. Over the past three fiscal years,
sales in each of the first, third and fourth quarters represented between 20%
and 23% of our annual sales. Our higher sales in the second quarter typically
generate a substantial portion of our operating income for the year. In
anticipation of increased sales activity during the second quarter, we incur
significant additional expenses, including higher inventory costs. If, for any
reason, we miscalculate the demand for our products during November and
December, we could have significant excess inventory, which would have an
adverse affect on our financial performance. In addition, because a substantial
portion of our operating income is derived from our second quarter sales, a
significant shortfall in expected second quarter sales could have an adverse
impact on our annual operating results. We have sometimes experienced and may
continue to experience net losses in any of our first, third or fourth fiscal
quarters.

Our quarterly results of operations may also fluctuate significantly as a
result of a variety of other factors, including, among other things:

- the timing of new store openings;

- net sales and profits contributed by new stores;

- increases or decreases in comparable store sales;

- shifts in the timing of holidays;

- changes in our merchandise mix; and

- the timing of new catalog releases and new product introductions.

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As a result of these seasonal and quarterly fluctuations, we believe that
comparisons of our sales and operating results between different quarters within
a single fiscal year are not necessarily meaningful and that these comparisons
cannot be relied upon as indicators of our future performance. Any seasonal or
quarterly fluctuations that we report in the future may not match the
expectations of market analysts and investors. This could cause the trading
price of our common stock to fluctuate significantly.

OUR INTERNATIONAL PRODUCT SOURCING AND SALES EFFORTS MAY BE SUBJECT TO ADVERSE
INTERNATIONAL EVENTS THAT ARE BEYOND OUR CONTROL.

Approximately 65% of our fiscal year 2000 non-licensed product needs,
measured as a percentage of total units produced, will be supplied by over 24
independent non-U.S. manufacturers in countries such as China, Costa Rica,
Mexico, India, the Dominican Republic, Italy, Spain, Hungary and Turkey.
Independent manufacturers in China will account for 24% of our product needs for
fiscal year 2000. Our international sourcing is subject to many risks, including
foreign governmental regulations, political unrest, disruptions or delays in
shipments, changes in local economic conditions and trade issues. These factors,
among others, could influence the ability of our independent manufacturers to
make or export our products cost-effectively or at all or to procure some of the
materials used in our products. The violation of labor or other laws by any of
our independent manufacturers, or the divergence of an independent
manufacturer's labor practices from those generally accepted as ethical by us or
others in the U.S., could force us to locate alternative manufacturing sources.
Currency exchange rate fluctuations could also make raw materials more expensive
for our independent manufacturers, and they could pass these increased costs
along to us, resulting in higher costs and decreased margins for our products.
If any of these factors were to render a particular country undesirable or
impractical as a source of supply, there could be an adverse effect on our
business.

Approximately 10% of our fiscal year 2000 sales will be generated through
international channels and we plan to increase our international sales efforts.
International sales are subject to many risks, including foreign governmental
regulations, foreign consumer preferences, political unrest, disruptions or
delays in shipments to other nations and changes in local economic conditions.
These factors, among others, could influence our ability to sell products
successfully in international markets. We generally purchase raw materials and
our outsourced products in U.S. dollars and sell our products in the U.S. and to
our international wholesale customers in U.S. dollars. However, our
international wholesale customers sell our products in the relevant local
currencies, and currency exchange rate fluctuations could adversely affect the
retail prices of our products and result in decreased international consumer
demand.

OUR TRADEMARKS AND OTHER PROPRIETARY RIGHTS MAY BE INFRINGED BY OTHERS.

We believe that our registered and common law trademarks and design patents
have significant value and are important to our ability to create and sustain
demand for our products. Although we have not been inhibited from selling our
products in connection with trademark, patent or trade dress disputes, we cannot
assure you that obstacles will not arise as we expand our product line and the
geographic scope of our marketing. We also cannot assure you that the actions
taken by us to establish and protect our trademarks and other proprietary rights
will be adequate to prevent imitation of our products or infringement of our
trademarks and proprietary rights by others. The laws of some foreign countries
may not protect proprietary rights to the same extent as do the laws of the U.S.
and it may be more difficult for us to successfully challenge the use of our
proprietary rights by other parties in these countries.

8
<PAGE>
RISKS RELATED TO OUR RELATIONSHIP WITH SARA LEE

WE WILL BE CONTROLLED BY SARA LEE AS LONG AS IT OWNS A MAJORITY OF OUR COMMON
STOCK, WHICH MAY LEAD TO CONFLICTS OF INTEREST.

After the completion of this offering, Sara Lee will own approximately %
of the outstanding shares of our common stock, or approximately % if the
underwriters fully exercise their option to purchase additional shares.
Investors in this offering will not be able to affect the outcome of any
stockholder vote at least for so long as Sara Lee owns a majority of our
outstanding common stock. As a result, Sara Lee will control all matters
affecting us, including:

- the composition of our board of directors and, through it, any
determination with respect to our business direction and policies,
including the appointment and removal of officers;

- any determinations with respect to mergers or other business combinations;

- our acquisition or disposition of assets;

- our financing;

- changes to the agreements providing for our separation from Sara Lee;

- the payment of dividends on our common stock; and

- determinations with respect to our tax returns.

If Sara Lee were to sell a controlling interest in Coach to a third party,
such third party would be under no obligation to dispose of its controlling
interest.

Conflicts of interest may arise between Sara Lee and us in a number of areas
relating to our past and ongoing relationships as a result of our separation
from Sara Lee and Sara Lee's continued controlling interest in us. These may
include the nature and quality of services rendered by Sara Lee to us, tax and
employee benefit matters, indemnification obligations, insurance matters, sales
or distributions by Sara Lee of all or any portion of its ownership interest in
us and Sara Lee's ability to control our management and affairs. We may not be
able to resolve any potential conflicts, and even if we do, the resolution may
be less favorable than if we were dealing with an unaffiliated party.

SARA LEE MAY LATER DECIDE NOT TO COMPLETE AN EXCHANGE OR OTHER DISTRIBUTION OF
OUR COMMON STOCK, WHICH COULD HAVE AN ADVERSE EFFECT UPON THE MARKET FOR OUR
COMMON STOCK AND CONSTRAIN OUR ABILITY TO ISSUE ADDITIONAL EQUITY SECURITIES.

Sara Lee currently is planning to effect an exchange or other distribution
of its shares of our common stock within 18 months of this offering, although no
specific timetable has been finally determined. Sara Lee is not obligated to
complete any exchange or other distribution of our common stock and it may not
occur. Until Sara Lee consummates an exchange or other distribution of our
common stock, the liquidity of our shares in the market may be constrained.
Because of the limited liquidity of our stock, relatively small trades of our
stock may have a disproportionate effect on our stock price. After the 180-day
period following this offering, which may be waived by the underwriters, there
are no contractual limitations on sales of our common stock by Sara Lee. The
sale or potential sale by Sara Lee of our stock could adversely affect the
market price of our stock.

Sara Lee must own 80% or more of our common stock to continue to consolidate
our business with its other businesses for tax purposes and to preserve the
tax-free status of any exchange or other distribution of its remaining shares of
our common stock. As a result, Sara Lee may prevent us from issuing additional
equity securities for purposes such as providing management incentives or
raising capital unless and until an exchange or other distribution occurs.

9
<PAGE>
OUR HISTORICAL FINANCIAL INFORMATION MAY NOT BE REPRESENTATIVE OF OUR RESULTS AS
A SEPARATE COMPANY.

Our financial statements have been created from the financial statements of
Sara Lee using the historical results of operations and historical bases of the
assets and liabilities of the Coach division that we comprised. Accordingly, the
historical financial information we have included in this prospectus does not
necessarily reflect what our financial position, results of operations and cash
flows would have been had we been a separate, stand-alone entity during the
periods presented. Sara Lee did not account for us, and we were not operated, as
a separate, stand-alone entity for the periods presented. The historical
financial information is not necessarily indicative of what our results of
operations, financial position and cash flows will be in the future and does not
reflect many significant changes that will occur in the capital structure,
funding and operations of Coach as a result of our separation from Sara Lee. For
example, we may face increased costs for store leases, insurance, employee
benefits and financing as a stand-alone entity.

ALL OF THE NET PROCEEDS OF THIS OFFERING WILL BE USED TO REPAY INDEBTEDNESS OWED
TO A SARA LEE SUBSIDIARY.

We intend to use all of the net proceeds from this offering to repay a
portion of indebtedness payable to a subsidiary of Sara Lee. We are assuming the
indebtedness in connection with our separation from Sara Lee. As a result, the
net proceeds from this offering will not be available for our business needs,
such as funding working capital or the expansion of our operations.

RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR COMMON STOCK

OUR SECURITIES HAVE NO PRIOR MARKET, AND WE CANNOT ASSURE YOU THAT OUR STOCK
PRICE WILL NOT DECLINE AFTER THE OFFERING.

Before this offering, there has not been a public market for our common
stock, and an active public market for our common stock may not develop or be
sustained after this offering. The market price of our common stock could be
subject to significant fluctuations after this offering. Among the factors that
could affect our stock price are:

- quarterly variations in our operating results;

- changes in sales or earnings estimates or the publication of research
reports by analysts;

- speculation in the press or the investment community;

- strategic actions by us or our competitors, such as acquisitions or
restructurings;

- actions by institutional stockholders or by Sara Lee prior to its exchange
or other distribution of our stock;

- general market conditions; and

- domestic and international economic factors unrelated to our business
actions.

In particular, we cannot assure you that you will be able to resell our shares
at or above the initial public offering price. The initial public offering price
will be determined by negotiations between the representatives of the
underwriters and us.

PROVISIONS IN OUR CHARTER AND BYLAWS AND MARYLAND LAW MAY DELAY OR PREVENT AN
ACQUISITION OF US BY A THIRD PARTY.

Our charter and bylaws and Maryland law contain provisions that could make
it harder for a third party to acquire us without the consent of our board of
directors. These provisions have little

10
<PAGE>
significance while we are controlled by Sara Lee, but could have considerable
significance in the future. Our charter authorizes us to issue additional
authorized but unissued shares of common stock or preferred stock and permits
our board of directors, without stockholder approval, to amend the charter to
increase or decrease the aggregate number of shares of stock or the number of
shares of stock of any class or series that we have the authority to issue. In
addition, our board of directors may classify or reclassify any unissued shares
of common stock or preferred stock and may set the preferences, rights and other
terms of the classified or reclassified shares. Although our board of directors
has no intention to do so at the present time, it could establish a series of
preferred stock that could have the effect of delaying, deferring or preventing
a transaction or a change in control that might involve a premium price for our
common stock or otherwise be in the best interest of our stockholders.

Our bylaws can only be amended by our board of directors. Our bylaws also
provide that nominations of persons for election to our board of directors and
the proposal of business to be considered at a stockholder meeting may be made
only in the notice of the meeting, by our board of directors or by a stockholder
who is entitled to vote at the meeting and has complied with the advance notice
procedures of our bylaws. So long as Sara Lee or its affiliates own a majority
of our outstanding common stock, Sara Lee is not required to comply with these
advance notice requirements. Also, under Maryland law, business combinations,
including issuances of equity securities, between us and any person who
beneficially owns 10% or more of our common stock or an affiliate of such person
are prohibited for a five year period unless exempted by the statute. After this
period, a combination of this type must be approved by two super-majority
stockholder votes, unless some conditions are met or the business combination is
exempted by our board of directors. Our board has exempted any business
combination with Sara Lee or any of its affiliates from these five year
prohibition and super-majority vote requirements.

These and other provisions of Maryland law or our charter and bylaws could
have the effect of delaying, deferring or preventing a transaction or a change
in control that might involve a premium price for our common stock or otherwise
be in the best interest of our stockholders.

PURCHASERS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE DILUTION IN NET TANGIBLE
BOOK VALUE PER SHARE.

Purchasers of our common stock in this offering will experience immediate
dilution of $ in net tangible book value per share.

11
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA

You should not rely on forward-looking statements in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends," "may," "will," "should," "estimates,"
"predicts," "potential," "continue" and similar expressions to identify these
forward-looking statements. Our actual results could differ materially from the
results contemplated by these forward-looking statements due to a number of
factors, including those discussed in the sections in this prospectus entitled
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and other sections of this prospectus.

This prospectus also contains forward-looking statements attributed to
third-parties relating to their estimates regarding the growth of our market.
These market data projections are based on a number of assumptions. If these
assumptions turn out to be incorrect, actual results may differ from the
projections based on these assumptions. As a result, our market may not grow at
the rate projected by these data projections, or at all. The failure of our
market to grow at the projected rate may have a material adverse effect on our
business, results of operations and financial condition and the market price of
our common stock.

12
<PAGE>
OUR SEPARATION FROM SARA LEE

OVERVIEW

On May 30, 2000, Sara Lee announced a plan to narrow its focus on a smaller
number of global branded consumer packaged goods segments by, among other
things, initiating plans to dispose of some of its businesses. The plan includes
the initial public offering of up to 19.9% of our common stock, to be followed
by an exchange or other distribution of our common stock by Sara Lee. We expect
that the separation of our business from Sara Lee, including the transfer of
related assets and liabilities, will be substantially accomplished before the
completion of this offering. Until the completion of this offering, we will be a
wholly-owned subsidiary of Sara Lee.

BENEFITS OF THE SEPARATION

We believe that we will realize benefits from our separation from Sara Lee,
including the following:

GREATER STRATEGIC FOCUS. We expect to have a sharper focus on our
business and strategic opportunities for growth as a result of having our
own board of directors which will concentrate on our business.

INCREASED SPEED AND RESPONSIVENESS. As a company smaller in size than
Sara Lee, we expect to be able to make decisions more quickly, deploy
resources more rapidly and efficiently and operate with more agility than we
could as a part of a larger organization. In addition, we expect to increase
our responsiveness to customers and others.

BETTER INCENTIVES FOR EXECUTIVES AND EMPLOYEES. We expect that the
motivation of our executives and employees and the focus of our management
will be strengthened by the addition of incentive compensation programs tied
to the market performance of our common stock. The separation will enable us
to offer our employees compensation directly linked to our performance,
which we expect will enhance our ability to attract and retain qualified
personnel.

SEPARATION AND TRANSITIONAL ARRANGEMENTS

We will enter into agreements with Sara Lee providing for the separation of
our business from Sara Lee, including a master separation agreement. These
agreements will provide for, among other things, the transfer from Sara Lee to
us of assets and the assumption by us of liabilities relating to our business
and various interim and ongoing relationships between us and Sara Lee.

THE EXCHANGE OR OTHER DISTRIBUTION BY SARA LEE OF OUR COMMON STOCK

After completion of this offering, Sara Lee will own approximately %
of the outstanding shares of our common stock, or approximately % if the
underwriters fully exercise their option to purchase additional shares from us.
Sara Lee currently is planning to effect an exchange or other distribution of
its shares of our common stock within 18 months of this offering, although the
timing of the exchange or other distribution has not yet been finally
determined. Sara Lee is not obligated to complete any exchange or other
distribution, and we cannot assure you as to whether, when or how it will occur.
Sara Lee, in its sole and absolute discretion, will determine the date of any
exchange or other distribution and its timing, terms and conditions. Sara Lee's
decision whether to proceed with any exchange or other distribution is subject
to legal considerations, including the taxable or tax-free nature of the
exchange or other distribution, future market conditions and other circumstances
that may cause Sara Lee's board of directors to conclude that an exchange or
other distribution would not be in the interests of Sara Lee's stockholders. We
have agreed to take all action reasonably requested by Sara Lee to facilitate
the exchange or other distribution.

13
<PAGE>
USE OF PROCEEDS

We estimate that our net proceeds from this offering will be approximately
$ million, based on an assumed initial public offering price of
$ per share and after deducting an assumed underwriting discount and the
estimated offering expenses payable by us. We intend to use the proceeds of this
offering to repay a portion of an intercompany note payable to a subsidiary of
Sara Lee. We are assuming the note in connection with our separation from Sara
Lee. The note represents our allocable portion of indebtedness of Sara Lee. The
note will have an initial aggregate principal amount of $190 million and will
have a final maturity of June 30, 2002. The note will be subject to mandatory
prepayment out of our excess cash flow after payment of all amounts outstanding
under our revolving credit facility with Sara Lee. The note will bear interest
at a rate based on one month LIBOR plus 30 basis points, for as long as Sara Lee
owns a majority of our outstanding stock, and one month LIBOR plus 250 basis
points thereafter.

DIVIDEND POLICY

We currently intend to retain any future earnings to fund the development
and growth of our business. Therefore, we do not anticipate paying any cash
dividends in the foreseeable future.

Under Maryland law, our board of directors decides whether and when to
declare dividends. The declaration of future dividends, if any, will depend upon
various factors, including our net income, current and anticipated cash needs
and any other factors deemed relevant by our board. As long as Sara Lee owns a
majority of our outstanding common stock, it will control the composition of our
board of directors and thereby control decisions regarding our payment of
dividends.

We are prohibited from paying any dividends on our capital stock as long as
our revolving credit facility with Sara Lee is outstanding. Any subsequent
revolving credit facility with another party may contain similar restrictions.

14
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of April 1, 2000. Our
capitalization is presented:

- on an actual basis;

- on a pro forma basis to reflect the transactions related to our separation
from Sara Lee; and

- on a pro forma as adjusted basis to reflect our receipt of the estimated
net proceeds from our sale of shares of common stock in this
offering and the payment of a portion of the indebtedness payable to a
subsidiary of Sara Lee which will be assumed by us in connection with our
separation from Sara Lee.

You should read the information set forth below together with "Selected
Financial Data," our historical financial statements and the notes to those
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus.

<TABLE>
<CAPTION>
APRIL 1, 2000
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Receivable from Sara Lee(1)............................... $(89,537) $ $
-------- -------- --------

Payable to a Sara Lee subsidiary(2)....................... --
Other debt................................................ 4,002
-------- -------- --------
Total debt................................................ 4,002
-------- -------- --------
Common stockholder's net investment
Preferred stock: (authorized 25,000,000 shares; $.01 par
value) None issued.................................... --
Common stock: (authorized 100,000,000 shares; $.01 par
value) 1,000 shares issued and outstanding, on an
actual basis; shares issued and outstanding, on
a pro forma basis; shares issued and
outstanding, on a pro forma as adjusted basis......... --
Capital surplus......................................... --
Sara Lee Corporation equity............................. 236,135
Accumulated other comprehensive loss.................... (639)
-------- -------- --------
Total equity.............................................. 235,496
-------- -------- --------
Total capitalization...................................... 149,961
======== ======== ========
</TABLE>

--------------

(1) The receivable from Sara Lee will be capitalized into Sara Lee's investment
prior to the offering.

(2) We intend to use all of the estimated net proceeds of this offering to repay
$ in principal of an intercompany note payable to a subsidiary
of Sara Lee. $ aggregate principal amount will remain
outstanding under the note after our payment.

15
<PAGE>
DILUTION

Our net tangible book value at April 1, 2000 was approximately
$ million, or $ per share. Pro forma net tangible book value per share
is determined by dividing our pro forma tangible net worth, which is total
tangible assets less total liabilities by the number of shares of common stock
outstanding immediately before this offering. Dilution in pro forma net tangible
book value per share represents the difference between the amount per share paid
by purchasers of shares of our common stock in this offering and the pro forma
net tangible book value per share of our common stock immediately afterwards.
After giving effect to our sale of shares of common stock in this offering
at an assumed initial public offering price of $ per share and after
deducting the underwriting discount and estimated offering expenses payable by
us, our pro forma as adjusted net tangible book value at April 1, 2000 would
have been approximately $ million, or $ per share. This represents an
immediate increase in pro forma net tangible book value of $ per share to
our existing stockholder and an immediate dilution in pro forma net tangible
book value of $ per share to new investors purchasing shares of common
stock in this offering.

The following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of April 1,
2000.................................................... $
Increase in pro forma book value per share attributable to
new investors...........................................
-------
Pro forma, as adjusted, net tangible book value per share
after this offering.......................................
-------
Dilution in pro forma net tangible book value per share to
new investors............................................. $
=======
</TABLE>

The discussion and table above assume no exercise of options outstanding
under our stock plans and no issuance of shares reserved for future issuance
under our stock plans. Approximately shares of our common stock are
reserved for issuance under our stock plans. At the time of this offering, we
intend to grant options to purchase up to approximately shares of
our common stock at the offering price to some of our directors, officers and
employees. In addition to the common stock reserved for issuance under our stock
plans, we intend to offer to selected executive employees up to an aggregate of
shares of our common stock, subject to the surrender and cancellation of
previously granted options to purchase Sara Lee common stock. To the extent that
any options to purchase our common stock are granted and exercised, there will
be further dilution to new investors.

The following table sets forth, as of April 1, 2000 on the pro forma as
adjusted basis described above, the differences between the number of shares of
common stock purchased from us, the total price paid and average price per share
paid by our existing stockholder and by the new investors in this offering at an
assumed initial public offering price of $ per share, before deducting
the estimated underwriting discounts and commissions and estimated offering
expenses payable by us.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- --------------------- PRICE PER
NUMBER PERCENTAGE AMOUNT PERCENTAGE SHARE
-------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholder....................... % $ -- --% $ --
New investors..............................
------ ----- ------ -----
Total.................................... 100.0% $ 100.0%
====== ===== ====== =====
</TABLE>

Nominal cash was paid by Sara Lee in consideration for our common stock.
Accordingly, the cash consideration related to the existing stockholder is
reported as zero in the table above.

16
<PAGE>
If the underwriters' option to purchase additional shares is exercised in
full, the following will occur:

- the number of shares of common stock held by our existing stockholder will
decrease to approximately % of the total number of shares of common
stock outstanding; and

- the number of shares held by new investors will be increased to
shares or approximately % of the total number of shares of
our common stock outstanding after this offering.

17
<PAGE>
SELECTED FINANCIAL DATA

The following tables present our selected financial data. The information
set forth below should be read together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our historical
financial statements and notes to those statements included elsewhere in this
prospectus. Our statements of operations data set forth below for the years
ended June 28, 1997, June 27, 1998, and July 3, 1999 and the balance sheet data
as of June 27, 1998, and July 3, 1999 are derived from our audited financial
statements included elsewhere in this prospectus which have been audited by
Arthur Andersen, LLP, independent auditors, whose report is also included in
this prospectus.

The statements of operations data for the year ended July 1, 1995 and
June 29, 1996 are derived from our unaudited financial data that is not included
in this prospectus. The statements of operations data for the 39 weeks ended
March 27, 1999 and April 1, 2000 and the balance sheet data as of March 27, 1999
and April 1, 2000 are derived from unaudited financial statements included
elsewhere in this prospectus and, in the opinion of management, include all
adjustments, consisting only of normal recurring accruals, that are necessary
for a fair presentation of our financial position and results of operations for
these periods. The historical financial information may not be indicative of our
future performance and may not reflect what our financial position and results
of operations would have been had we operated as a separate, stand-alone entity
during the periods presented.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
------------------------------------------------------------- -------------------------
JULY 1, JUNE 29, MARCH 27, APRIL 1,
1995 1996 JUNE 28, JUNE 27, JULY 3, 1999 2000
(UNAUDITED) (UNAUDITED) 1997 1998 1999 (UNAUDITED) (UNAUDITED)
----------- ----------- --------- --------- --------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED AND COMBINED STATEMENT OF
INCOME DATA:
Net sales............................. $395,021 $512,645 $540,366 $522,220 $507,781 $389,502 $427,232
Cost of sales......................... 159,325 211,977 227,086 235,512 226,190 173,811 173,199
Gross profit.......................... 235,696 300,668 313,280 286,708 281,591 215,691 254,033
Selling, general and administrative
expenses............................ 178,221 238,621 269,011 261,695 255,008 186,071 206,399
Reorganization costs.................. -- -- -- -- 7,108 7,108 --
-------- -------- -------- -------- -------- -------- --------
Operating income...................... 57,475 62,047 44,269 25,013 19,475 22,512 47,634
Net interest expense.................. (331) (247) (492) (236) (414) (320) (291)
Minority interest..................... (212) -- (95) 66 -- -- --
-------- -------- -------- -------- -------- -------- --------
Income before income taxes............ 56,932 61,800 43,682 24,843 19,061 22,192 47,343
Income taxes.......................... 19,963 18,940 11,645 4,180 2,346 2,954 15,174
-------- -------- -------- -------- -------- -------- --------
Net income............................ $ 36,969 $ 42,860 $ 32,037 $ 20,663 $ 16,715 $ 19,238 $ 32,169
======== ======== ======== ======== ======== ======== ========
Pro forma as adjusted net
income (1).......................... $ $
======== ========
Net income per share--basic........... $ $ $ $ $ $ $
======== ======== ======== ======== ======== ======== ========
--diluted........................... $ $ $ $ $ $ $
======== ======== ======== ======== ======== ======== ========
Shares used in computing net income
per share--basic....................
======== ======== ======== ======== ======== ======== ========
--diluted...........................
======== ======== ======== ======== ======== ======== ========
Unaudited pro forma as adjusted net
income per share--basic............. $ $
======== ========
--diluted........................... $ $
======== ========
Shares used in computing unaudited pro
forma as adjusted net income per
share--basic........................
======== ========
--diluted...........................
======== ========
</TABLE>

18
<PAGE>

<TABLE>
<CAPTION>
MARCH 27, APRIL 1,
JUNE 27, JULY 3, 1999 2000
1998 1999 (UNAUDITED) (UNAUDITED)
--------- --------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED AND COMBINED BALANCE SHEET DATA:
Working capital.............................................................. $ 95,554 $ 51,685 $ 62,160 $ 46,387
Inventory.................................................................... 132,400 101,395 103,754 100,642
(Payable to) receivable from Sara Lee (2).................................... (11,088) 54,150 46,346 89,537
Total assets................................................................. 257,710 282,088 285,218 326,715
Stockholder's net investment................................................. 186,859 203,162 205,796 235,496
</TABLE>

------------------------------

(1) Pro forma as adjusted amounts give effect to the following actions as though
these actions had been taken as of June 28, 1998:

- our assumption, prior to the offering, of $190 million of indebtedness
to a subsidiary of Sara Lee and the resulting reduction in Sara Lee's
equity;

- capitalization of the receivable from Sara Lee in the amount of
$89.5 million into Sara Lee's equity;

- our sale of shares of common stock in this offering at an
assumed initial public offering price of $
per share and after deducting an assumed underwriting discount and
estimated offering expenses payable by us;

Upon Sara Lee's exchange or other distribution of our common stock we will no
longer participate in Sara Lee's benefit plans, insurance plans and working
capital funding arrangements. We may face increased costs for these and
other items, such as store leases, following this offering. At this time, we
cannot estimate the amount or timing of these increased costs and,
accordingly, we have not included this amount in the pro forma as adjusted
amounts.

19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ TOGETHER WITH OUR FINANCIAL STATEMENTS AND NOTES TO
THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

Coach was founded in 1941 and has been owned by Sara Lee since 1985. Coach
is a leading designer, producer and marketer of high-quality, modern, American
classic accessories. Our primary product offerings include handbags, men's and
women's accessories, business cases, luggage and travel accessories, time
management products, leather outerwear, gloves and scarves.

Coach generates sales by selling its products directly to consumers and to
wholesale customers and by licensing its brand name to select manufacturers.
Direct to consumer sales consist of sales of Coach products through our
106 company-operated U.S. retail stores, our direct mail catalogs, our
e-commerce website, COACH.COM, and our 63 company-operated U.S. factory stores.
Wholesale sales consist of sales of Coach products to approximately
1,400 department stores and specialty retailers in the U.S., and approximately
175 international department stores, retail stores and duty free shops in 18
countries. In the U.S., Coach generates additional wholesale sales through
business-to-business programs, in which companies purchase Coach products to use
as gifts or incentive rewards. Licensing revenues consist of royalties paid to
Coach under licensing arrangements with select manufacturers for the sale of
Coach branded watches, footwear, furniture and eyewear.

Our net sales grew at a compound annual growth rate of approximately 32%
from $19.0 million in 1985, when we were acquired by Sara Lee, to
$540.4 million in fiscal year 1997. In fiscal years 1998 and 1999, we
experienced sales declines of 3.4% and 2.8%, respectively, our first
year-to-year sales declines since becoming part of Sara Lee. While Coach
remained a leader in classically styled leather goods, handbags and accessories,
consumers began to demand more fashion-oriented products using lighter-weight
materials, which some of our competitors offered. At the same time, the economic
downturn in Asia significantly curtailed tourism and consumer spending, and thus
adversely affected our sales to Japanese consumers, our most important
international consumer group. During fiscal years 1997 through 1999, we also
experienced reduced profitability due to lower gross profits associated with
slowing and declining sales coupled with additional costs related to investments
in new stores, design talent, advertising and company-wide systems.

During this period, we implemented these and other initiatives to reorganize
our business and to enable us to deliver new products in a broader array of
materials and styles. Both domestic and international sales increased
substantially during the first 39 weeks of fiscal 2000, primarily as a result of
demand for our new product assortments and new store openings as well as the
economic recovery in Asia. The increase in sales, combined with a lower cost
structure, improved our profitability during this period.

Our cost of sales consists of the costs associated with manufacturing our
products. Our gross profit is dependent upon a variety of factors and may
fluctuate from quarter to quarter. These factors include changes in the mix of
products we sell, fluctuations in cost of sales and changes in the relative
sales mix among our distribution channels. Generally, direct to consumer sales
have generated higher gross margins than wholesale sales, and international
sales have generated higher gross margins than domestic wholesale sales.

Selling, general and administrative, or SG&A, expenses consist of all
expenses directly related to selling our products, such as store lease payments,
store employee compensation, product distribution expenses, marketing and
promotion costs, mail order costs, new product design and

20
<PAGE>
other administrative expenses. SG&A expenses are affected by the number of
stores we open and operate in any fiscal period and the relative proportions of
retail and wholesale sales. SG&A expenses increase as we operate more stores,
although an increase in the number of stores generally enables us to spread the
fixed portion of our SG&A expenses over a larger sales base.

In fiscal 1998, we discontinued our Mark Cross product line, which consisted
of women's and men's leather accessories and gifts, due to poor performance and
to focus on the Coach brand. We also discontinued our Coach men's apparel line,
and converted our footwear line from a sourced relationship to a licensing
relationship. The cost incurred in fiscal year 1998 to discontinue the Mark
Cross product line was $5.7 million, including the cost of closing its seven
retail stores. We incurred approximately $1.3 million in expenses in connection
with the discontinuation of our men's apparel line and the conversion of our
footwear line relationship.

As part of the transformation of our business, we consolidated our
distribution operations into our Jacksonville, Florida distribution facility in
fiscal 1999 to reduce costs and provide capacity for future unit growth. In
addition, we significantly reduced manufacturing operations in our Carlstadt,
New Jersey facility and transferred production to lower cost independent
manufacturers. We continue to manufacture prototypes at the Carlstadt facility.
The total cost of the reorganization of our distribution and manufacturing
operations in fiscal 1999 was $7.1 million, comprised of $5.7 million associated
with the Carlstadt shutdown, $1.1 million associated with manufacturing
reductions in Medley, Florida and $0.3 million associated with manufacturing
reductions in Florence, Italy.

Our fiscal year ends on the Saturday closest to June 30. Fiscal year 1999
consists of 53 weeks and fiscal years 1995, 1996, 1997, 1998 and 2000 each
consist of 52 weeks.

SALES

The following discussion and table provides further information regarding
our two distribution channels, our net sales by region, and our annual and
interim results.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
---------------------------------------------------------- -------------------------
JULY 1, JUNE 29, MARCH 27, APRIL 1,
1995(1) 1996(1) JUNE 28, JUNE 27, JULY 3, 1999 2000
(UNAUDITED) (UNAUDITED) 1997(1) 1998(1) 1999(1) (UNAUDITED) (UNAUDITED)
----------- ----------- -------- -------- ------- ----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
NET SALES
By Channel:
Direct to Consumer......... $225.8 $280.2 $331.0 $333.5 $336.5 $256.6 $271.5
Wholesale.................. 169.2 232.4 209.4 188.7 171.3 132.9 155.7
------ ------ ------ ------ ------ ------ ------
$395.0 $512.6 $540.4 $522.2 $507.8 $389.5 $427.2
====== ====== ====== ====== ====== ====== ======
By Region:
United States.............. $346.1 $436.4 $485.4 $478.6 $463.0 $356.6 $383.4
International.............. 48.9 76.2 55.0 43.6 44.8 32.9 43.8
------ ------ ------ ------ ------ ------ ------
$395.0 $512.6 $540.4 $522.2 $507.8 $389.5 $427.2
====== ====== ====== ====== ====== ====== ======
</TABLE>

--------------

(1) Includes net sales of our discontinued Mark Cross product line equal to
$12.7 million, $15.6 million, $16.4 million and $6.5 million for fiscal
years 1995, 1996, 1997 and 1998, respectively.

21
<PAGE>
Direct to consumer net sales increased from $225.8 million in fiscal 1995 to
$336.5 million in fiscal 1999. The growth in direct to consumer net sales was
primarily attributable to an increase in the number of our stores throughout the
U.S. Since the beginning of 1995, we have opened 40 retail stores and
44 factory stores, while closing 13 retail stores and six factory stores.

Wholesale net sales increased slightly from $169.2 million in fiscal 1995 to
$171.3 million in fiscal 1999. This increase was primarily the result of growth
in sales in our business-to-business programs, largely offset by a decline in
shipments to U.S. department stores and third-party international distributors.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

We have experienced, and expect to continue to experience, fluctuations in
our quarterly operating results. Although there are numerous factors that can
contribute to these fluctuations, the principal factor is seasonality.

SEASONALITY. Because our products are frequently given as gifts, we have
historically realized, and expect to continue to realize, higher sales and
operating income in the second quarter of our fiscal year. In addition, we have
sometimes experienced and may continue to experience net losses in any of our
first, third or fourth fiscal quarters. Over the past three fiscal years,
between 34% and 36% of our annual sales were recognized in the second quarter,
which includes the holiday months of November and December. Over the past three
fiscal years, sales in each of the first, third and fourth quarters have
represented between 20% and 23% of our annual sales. The higher sales in the
second quarter typically result in higher operating profits and margins. This is
due to higher gross profits, with no substantial corresponding increase in fixed
costs related to operating retail stores and other administrative and selling
costs, which remain fairly constant throughout the year. During the holiday
season, these fixed costs are spread over more sales, resulting in greater
operating profits expressed in both dollars and as a percent of sales in the
second quarter compared to the other three quarters. We anticipate that our
sales and operating profit will continue to be seasonal in nature.

OTHER FACTORS. Our quarterly results of operations may also fluctuate
significantly as a result of a variety of other factors, including, among other
things:

- the timing of new store openings;

- net sales and profits contributed by new stores;

- increases or decreases in comparable store sales;

- shifts in the timing of holidays;

- changes in our merchandise mix; and

- the timing of new catalog releases and new product introductions.

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<PAGE>
RESULTS OF OPERATIONS

The following tables set forth, for the periods indicated, actual results
and the percentage relationship to net sales of selected items in our combined
statements of income:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
-------------------------------- -------------------------
MARCH 27, APRIL 1,
JUNE 28, JUNE 27, JULY 3, 1999 2000
1997(1) 1998(1) 1999(1) (UNAUDITED) (UNAUDITED)
-------- -------- ------- ----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales.................................. $540.4 $521.9 $507.0 $389.0 $425.9
Licensing revenue.......................... -- 0.3 0.8 0.5 1.3
------ ------ ------ ------ ------
Total net sales............................ 540.4 522.2 507.8 389.5 427.2
Gross profit............................... 313.3 286.7 281.6 215.7 254.0
Selling, general and administrative
expenses................................. 269.0 261.7 255.0 186.1 206.4
------ ------ ------ ------ ------
Operating income before reorganization
costs.................................... 44.3 25.0 26.6 29.6 47.6
Reorganization costs....................... -- -- 7.1 7.1 --
------ ------ ------ ------ ------
Operating income........................... 44.3 25.0 19.5 22.5 47.6
Net interest expense....................... (0.5) (0.2) (0.4) (0.3) (0.3)
Minority interest.......................... (0.1) 0.1 -- -- --
------ ------ ------ ------ ------
Income before income taxes................. 43.7 24.9 19.1 22.2 47.3
Income taxes............................... 11.7 4.2 2.4 3.0 15.1
------ ------ ------ ------ ------
Net income................................. $ 32.0 $ 20.7 $ 16.7 $ 19.2 $ 32.2
====== ====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
-------------------------------- -------------------------
MARCH 27, APRIL 1,
JUNE 28, JUNE 27, JULY 3, 1999 2000
1997(1) 1998(1) 1999(1) (UNAUDITED) (UNAUDITED)
-------- -------- ------- ----------- -----------
(PERCENTAGE OF NET SALES)
<S> <C> <C> <C> <C> <C>
Net sales.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Gross margin............................... 58.0 54.9 55.4 55.4 59.4
Selling, general and administrative
expenses................................. 49.8 50.1 50.2 47.8 48.3
----- ----- ----- ----- -----
Operating income before reorganization
costs.................................... 8.2 4.8 5.2 7.6 11.1
Reorganization costs....................... 0.0 0.0 1.4 1.8 --
----- ----- ----- ----- -----
Operating income........................... 8.2 4.8 3.8 5.8 11.1
Net interest expense....................... (0.1) -- -- (0.1) --
Minority interest.......................... -- -- -- -- --
----- ----- ----- ----- -----
Income before income taxes................. 8.1 4.8 3.8 5.7 11.1
Income taxes............................... 2.2 0.8 0.5 0.8 3.6
----- ----- ----- ----- -----
Net income................................. 5.9% 4.0% 3.3% 4.9% 7.5%
===== ===== ===== ===== =====
</TABLE>

--------------

(1) Includes net sales of our discontinued Mark Cross product line equal to
$12.7 million, $15.6 million, $16.4 million and $6.5 million for fiscal
years 1995, 1996, 1997 and 1998, respectively.

23
<PAGE>
39 WEEKS ENDED APRIL 1, 2000 COMPARED WITH 39 WEEKS ENDED MARCH 27, 1999

NET SALES

Net sales increased by 9.7% to $427.2 million in the first 39 weeks of
fiscal 2000 from $389.5 million during the same period of fiscal 1999. These
results reflect increased volume in the direct to consumer channel and, to a
greater extent, in the wholesale channels.

DIRECT TO CONSUMER. Sales increased 5.8% to $271.5 million in the first 39
weeks of fiscal 2000 from $256.6 million during the same period of fiscal 1999.
This sales growth was primarily attributable to comparable store sales growth of
7.8% and the opening of six new retail stores and one new factory store.
Comparable store sales growth for retail stores and factory stores open for one
full year was 12.1% and 3.6%, respectively. In addition, we renovated 18 retail
stores during fiscal 2000, which generated incremental sales growth after their
renovation. This growth was partially offset by the curtailment of warehouse and
employee sales totaling $6.5 million, the closing of three retail stores and one
factory store and the temporary closure of some stores for renovations. We
launched our e-commerce website, COACH.COM, in October 1999, which generated
$3.2 million in sales through April 1, 2000.

WHOLESALE. Sales increased 17.1% to $155.7 million in the first 39 weeks of
fiscal 2000 from $132.9 million during the same period of fiscal 1999. This
increase resulted from increased demand for our new product assortments and the
economic recovery in Asia. Licensing revenue increased 160% to $1.3 million in
the first 39 weeks of fiscal 2000. This increase reflects the full year impact
of the Coach footwear licensing arrangement and the introduction of the
furniture licensing arrangement in July 1999.

GROSS PROFIT

Gross profit increased 17.8% to $254.0 million in the first 39 weeks of
fiscal 2000 from $215.7 million during the same period of fiscal 1999. Gross
margin increased to 59.4% in the first 39 weeks of fiscal 2000 from 55.4% during
the same period of fiscal 1999. This increase in gross margin was primarily due
to manufacturing and sourcing cost reductions from our reorganization in 1999
that were realized during the first 39 weeks of fiscal 2000, as well as
increased sales at our retail stores and increased shipments to international
distributors. In fiscal 2000, approximately 65% of our total units produced will
be manufactured by independent manufacturers, compared to approximately 48% in
fiscal 1999.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses increased 10.9% to $206.4 million in the first 39 weeks of
fiscal 2000 from $186.1 million during the same period of fiscal 1999. As a
percentage of net sales, SG&A expenses were 48.3%, compared to 47.8% in the
first 39 weeks of fiscal 1999. SG&A expenses in the first 39 weeks of fiscal
2000 increased in dollars and as a percentage of net sales primarily as a result
of increases in performance-based compensation, costs associated with new store
openings and store expansions, advertising and design expenses.

OPERATING INCOME

Operating income increased 111.6% to $47.6 million in the first 39 weeks of
fiscal 2000 from $22.5 million during the same period of fiscal 1999. Before the
impact of reorganization costs in fiscal 1999, operating income increased 60.8%
to $47.6 million in the first 39 weeks of fiscal 2000 from $29.6 million during
the same period of fiscal 1999. This increase resulted primarily from an overall
increase in sales and improved gross margin in the first 39 weeks of fiscal
2000, which was partially offset by an increase in SG&A expenses.

24
<PAGE>
INCOME TAXES

Our effective tax rate increased to 32.1% in the first 39 weeks of fiscal
year 2000 from 13.3% during the same period of fiscal 1999, due to a lower
percentage of income attributable to off-shore manufacturing that is taxed at
lower rates.

NET INCOME

Net income increased 67.2% to $32.2 million in the first 39 weeks of fiscal
2000 from $19.2 million during the same period of fiscal 1999. This increase was
primarily caused by increased sales and improved gross margins partially offset
by an increase in SG&A expenses and taxes in the first 39 weeks of fiscal 2000.

FISCAL 1999 COMPARED TO FISCAL 1998

NET SALES

Net sales decreased 2.8% to $507.8 million in fiscal 1999 from
$522.2 million in fiscal 1998. These results reflect lower volume within the
wholesale business being partially offset by increased direct to consumer sales
and the fact that 1999 was a 53-week year.

DIRECT TO CONSUMER. Sales increased 0.9% to $336.5 million in fiscal 1999
from $333.5 million in fiscal 1998. This increase was due to the inclusion of
$5.3 million of sales in week 53 of fiscal 1999 and sales generated by four new
retail stores and two new factory stores. During this same period, we closed
three retail stores and two factory stores. Overall, comparable store sales
decreased 3.0%. Comparable store sales for the retail stores and factory stores
open for one full year increased 1.8% and decreased 7.5%, respectively, in
fiscal 1999. The increase in net sales was offset by a $4.7 million decrease in
sales attributable to the discontinuation of the Mark Cross product line and by
lower catalog sales.

WHOLESALE. Sales decreased 9.2% to $171.3 million in fiscal 1999 from
$188.7 million in fiscal 1998. These results were primarily due to increased
competition from designer brands in the U.S. market as well as a shift in
consumer demand from leather to mixed material and non-leather products.
Discontinuation of the Mark Cross product line reduced wholesale shipments by
$1.8 million. Fiscal 1999 wholesale results include $1.8 million of sales in
week 53. Licensing revenue increased 167% to $0.8 million in fiscal 1999 from
$0.3 million in fiscal 1998. This increase reflects the full year impact of the
Coach watch licensing arrangement.

GROSS PROFIT

Gross profit decreased 1.8% to $281.6 million in fiscal 1999 from
$286.7 million in fiscal 1998 primarily as a result of lower sales. Gross margin
increased to 55.4% in fiscal 1999 from 54.9% in fiscal 1998. This increase in
gross margin was primarily due to the increase in net sales of Coach's higher
margin direct to consumer sales as a percentage of total net sales, as well as
decreased manufacturing costs realized during fiscal 1999.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses decreased 2.6% to $255.0 million in fiscal 1999 from
$261.7 million in fiscal 1998. As a percentage of net sales, SG&A expenses
increased to 50.2% in fiscal 1999 as compared to 50.1% in fiscal 1998. The
decrease in SG&A expenses was primarily the result of the elimination of
expenses associated with the discontinued men's apparel line, the conversion of
the footwear line to a licensing arrangement, reduced and more focused
advertising spending, reduced wholesale operating costs, warehousing
efficiencies and general overhead cost reductions. These reductions were
partially offset by new store opening costs for four retail and two factory
stores.

Additionally, information technology expenses in fiscal 1999 were
$4.3 million less than fiscal 1998. The reduction in expenses was due to lower
development and training costs following the

25
<PAGE>
implementation of our enterprise resource planning software system, which
supports our accounting, procurement, inventory control and sales functions.

REORGANIZATION COSTS

In fiscal 1999, we reorganized and consolidated our manufacturing and
distribution operations, which resulted in reorganization costs of $7.1 million.
The reorganization of our manufacturing and distribution operations was
completed in the first quarter of fiscal 2000.

OPERATING INCOME

Operating income decreased 22.1% to $19.5 million in fiscal 1999 from
$25.0 million in fiscal 1998. Operating income before reorganization costs
increased 6.3% to $26.6 million in fiscal 1999 from $25.0 million in fiscal
1998, as a result of decreased sales, offset by improved gross margins and a
reduction in SG&A expenses.

INCOME TAXES

Our effective tax rate decreased to 12.3% in fiscal 1999 from 16.8% in
fiscal 1998, primarily due to tax benefits associated with product donations to
charitable organizations. The relatively low effective tax rate for both 1999
and 1998 was attributable to off-shore manufacturing income that is taxed at
lower rates.

NET INCOME

Net income declined 19.1% to $16.7 million in fiscal 1999 from
$20.7 million in fiscal 1998. This decrease was primarily the result of the
decrease in net sales and $7.1 million attributable to reorganization costs
partially offset by higher gross margins and the lower effective tax rate.

FISCAL 1998 COMPARED TO FISCAL 1997

NET SALES

Net sales decreased 3.4% to $522.2 million in fiscal 1998 from
$540.4 million in fiscal 1997. This decrease was the result of discontinuing the
Mark Cross product line, increased competition from designer brands in the U.S.
market as well as a shift in consumer demand from leather to mixed material and
non-leather products.

DIRECT TO CONSUMER. Sales increased 0.8% to $333.5 million in fiscal 1998
from $331.0 million in fiscal 1997. Sales increased $8.6 million due to the
opening of eight new retail stores and nine new factory stores in fiscal 1998,
while closing five retail stores and one factory store. However, this increase
was offset by a 5.0% decline in comparable store sales for retail stores open
for one full year while comparable store sales for factory stores open for one
full year were flat. Overall, comparable store sales decreased 2.5%. The retail
channel gains were offset by a decrease of $9.0 million due to discontinuing the
Mark Cross product line and a decrease of $3.9 million due to fewer employee
sales.

WHOLESALE. Sales decreased 9.9% to $188.7 million in fiscal 1998 from
$209.4 million in fiscal 1997. This decrease was attributable to a decline in
shipments to international distributors as a result of the economic downturn in
Asia and declining U.S. wholesale sales because of our product assortment.
Royalties of $0.3 million were generated by the Coach watch licensing
arrangement.

GROSS PROFIT

Gross profit decreased 8.5% to $286.7 million in fiscal 1998 from
$313.3 million in fiscal 1997. Gross margin decreased to 54.9% in fiscal 1998
from 58.0% in fiscal 1997. This decrease in gross margin resulted from increased
mark downs to move excess inventory, supply chain bottlenecks related to the
introduction of new product categories and increased overhead costs in
anticipation of increased production requirements that did not materialize.

26
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses decreased 2.7% to $261.7 million in fiscal 1998 from
$269.0 million in fiscal 1997. As a percentage of net sales, SG&A expenses
increased to 50.1% in fiscal 1998 from 49.8% fiscal 1997. $7.0 million of the
decrease in SG&A expenses was attributable to the discontinuation of the men's
apparel and Mark Cross product lines and the conversion of our footwear line to
a licensing arrangement. Additionally, in fiscal 1998, SG&A expenses benefited
from $6.0 million in reductions associated with development and training costs
following the implementation of the enterprise resource planning software
system. These savings were partially offset by increased selling expenses
related to the opening of eight retail stores and nine factory stores.

OPERATING INCOME

Operating income decreased 43.5% to $25.0 million in fiscal 1998 from
$44.3 million in fiscal 1997. This decrease primarily was a result of reduced
comparable store sales, wholesale sales and gross margins, as well as increased
costs to discontinue some of our product lines and a reduction in SG&A expenses.

INCOME TAXES

Our effective tax rate decreased to 16.8% in fiscal 1998 from 26.7% in
fiscal 1997, due to a higher percentage of income attributable to off-shore
manufacturing that is taxed at lower rates.

NET INCOME

Net income declined 35.5% to $20.7 million in fiscal 1998 from
$32.0 million in fiscal 1997. This decrease was caused by declining sales and
gross margin, which were partially offset by lower SG&A expenses and a lower
effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES

Historically, Sara Lee has managed cash on a centralized basis for Coach and
its other businesses. Cash receipts associated with our business have been
transferred directly to Sara Lee on a daily basis and Sara Lee has provided
funds to cover our disbursements. In accordance with the separation agreement,
Sara Lee will transfer to us the assets and liabilities which relate to our
business on the separation date, including the intercompany note payable to a
Sara Lee subsidiary. The net proceeds of this offering will be used to repay a
portion of the note.

Cash provided by operating activities, defined as net income plus
depreciation and amortization and the change in working capital, was
$55.5 million for the first 39 weeks of fiscal 2000. Cash provided by operating
activities was $79.0 million in fiscal 1999, $17.2 million in fiscal 1998 and
$35.9 million in fiscal 1997. We experience significant seasonal variations in
our working capital requirements. During the first fiscal quarter, we build
inventory for the holiday selling season. In the second fiscal quarter, our
working capital requirements are reduced substantially as we generate consumer
sales and collect wholesale accounts receivable.

We had capital expenditures of $19.4 million in the first 39 weeks of fiscal
2000, $13.5 million in fiscal 1999, $15.2 million in fiscal 1998 and
$30.2 million in fiscal 1997. Capital expenditures primarily consisted of
investments for new retail stores and retail store renovations. Approximately
60% of total capital expenditures for the first 39 weeks of fiscal 2000 were
spent on new retail stores and retail store renovations. Fiscal 1999 also
included the costs associated with the Jacksonville distribution center
expansion. In addition, in fiscal 1995, 1996 and 1997, we expended
$14.7 million for the implementation of an enterprise resource planning software
system of which $12.9 million was expensed as incurred and is included within
SG&A expenses.

Our future capital requirements will depend on a number of factors,
including the timing and rate of expansion of our business. Prior to the
completion of this offering, we will enter into a

27
<PAGE>
revolving credit facility with Sara Lee under which we may borrow up to
$75 million from Sara Lee. We presently anticipate that we will borrow
approximately $50 million under the revolving credit facility in the first
quarter of fiscal 2001 to fund increased inventory purchases in anticipation of
the holiday season and other working capital requirements. Our borrowing needs
could exceed $50 million depending on our anticipated holiday sales and other
working capital requirements that may arise. The revolving credit facility is
available to fund general corporate purposes and terminates when Sara Lee no
longer holds a majority of our outstanding common stock. We anticipate that at
such time we will enter into a revolving credit facility with a banking
institution. The revolving credit facility with Sara Lee contains customary
covenants restricting our activities, including our incurrence of secured
indebtedness and our entry into leases exceeding a specified amount, and
financial covenants based on our cash flow.

Under the real estate matters agreement with Sara Lee, we may also be
required to pay a monthly lease fee to Sara Lee if (1) by the date of any
exchange or other distribution of our common stock by Sara Lee, Sara Lee has not
been released from all obligations with respect to the leased properties
transferred to us and (2) we fail to satisfy certain financial ratios.

We believe that our operating cash flow together with our revolving credit
facility and any refinancings of the facility will provide sufficient capital to
fund our operations for the foreseeable future.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

FOREIGN EXCHANGE

Approximately 65% of our product needs are purchased from independent
manufacturers in countries such as China, Costa Rica, Mexico, India, the
Dominican Republic, Italy, Spain, Hungary and Turkey. Additionally, sales are
made through international channels to third-party distributors. Substantially
all purchases and sales involving international parties are denominated in U.S.
dollars and therefore are not hedged using any derivative instruments. We have
not used foreign exchange instruments in the past nor do we expect to use them
in the future.

INTEREST RATE

Historically, Sara Lee has made all of our cash management and short term
investment decisions. We have fixed rate long-term debt related to the
Jacksonville distribution center and use the sensitivity analysis technique to
evaluate the change in fair value of this debt instrument. At the end of 1999,
the effect of a 10% change in market interest rates was approximately
$0.2 million. We do not expect our operating results or cash flows to be
affected to any significant degree by the effect of a sudden change in market
interest rates.

COMMODITY

We buy tanned leather from various suppliers based upon fixed price purchase
contracts that extend for periods up to six months. These purchases are not
hedged with any derivative instrument. Due to the purchase contracts that are in
place, we do not expect that a sudden short-term change in leather prices will
have a significant effect on our operating results or cash flows. However, we
use the sensitivity analysis technique to evaluate the change in fair value of
the leather purchases based upon longer-term price trends. At the end of 1999, a
10% change in the underlying price of tanned leather would have had a
$6.9 million effect on cost of sales.

28
<PAGE>
EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998 and June 1999, the Financial Accounting Standards Board issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and
SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133. These
statements outline the accounting treatment for all derivative activity. We do
not use derivative instruments and these accounting statements will not have an
affect on us.

In May 2000, the Emerging Issues Task Force of the Financial Accounting
Standards Board announced that it reached a conclusion on Issue 00-14
"Accounting for Sales Incentives". Issue 00-14 establishes requirements for the
recognition and display of sales incentives such as discounts, coupons and
rebates within the financial statements. The Emerging Issues Task Force
conclusions on this issue will become effective for reporting periods beginning
after May 18, 2000. Because of the timing of the release of these conclusions,
we have yet to fully assess their effect on our results of operations and
financial position. Based upon the available information it is likely that the
adoption of this statement will result in the reclassification of various costs
within the captions of our income statement. At this time, we do not believe
that the adoption of this statement would affect our pretax earnings or net
income.

29
<PAGE>
BUSINESS

OVERVIEW

We are a leading designer, producer and marketer of high-quality, modern,
American classic accessories that complement the diverse lifestyles of
discerning women and men. Coach is one of the best recognized leather goods
brands in the U.S. and is enjoying increased recognition in targeted
international markets. We believe the prominence of the Coach brand results from
the unique combination of our original American attitude and design, our
heritage in fine leather products, our superior product quality and durability
and our commitment to customer service. Net sales were $507.8 million for fiscal
year 1999 and $427.2 million for the first 39 weeks of fiscal 2000. Operating
income before reorganization costs was $26.6 million for fiscal year 1999 and
$47.6 million for the first 39 weeks of fiscal 2000.

- 106 U.S. retail stores;

- direct mail catalogs;

- e-commerce website, COACH.COM; and

- 63 U.S. factory stores.

Our direct to consumer business will represent approximately 64% of our
total sales in fiscal year 2000. Our remaining sales are generated from products
sold through a number of indirect channels, including:

- approximately 1,400 department stores and specialty retailers in the U.S.;

- approximately 175 international department stores, retail stores and duty
free shops in 18 countries; and

- corporate sales programs.

Founded in 1941, we have grown from a family-run workshop in a Manhattan
loft to a premier accessories marketer in the U.S. We developed our initial
expertise in the small-scale production of classic, high-quality leather goods
constructed from "glove-tanned" leather with close attention to detail. By the
1980s, we had grown into a niche maker and marketer of traditionally styled,
high-quality leather goods with expanding national brand recognition, selling
our products through upscale department and specialty stores, our own retail
stores and our first direct mail catalog. Sara Lee acquired the Coach
Leatherware Company, our predecessor, in 1985. Since then, we have built upon
our national brand awareness, expanded into international sales, particularly in
Japan and East Asia, diversified our product offerings beyond handbags, further
developed our multi-channel distribution strategy and licensed products with the
Coach brand name.

30
<PAGE>
During this period, we embarked on a fundamental transformation of the Coach
brand. We repositioned Coach's image in a modern, fashionable direction to make
it more appealing to consumers. We built upon our popular core categories by
introducing new products in a broader array of materials and styles to respond
to consumers' demands for both fashion and function and we introduced new
product categories. In 1999, we began renovating Coach retail stores, select
U.S. department store locations and key international locations to create a
modern environment to showcase our new product assortments and reinforce a
consistent brand position. Over the last three years, we also have been
implementing a flexible, cost-effective sourcing and manufacturing model that
allows us to bring our broader range of products to market more rapidly and
efficiently.

We believe that these strategic initiatives have succeeded in repositioning
Coach as a modern lifestyle accessories brand. Primarily as a result of our
repositioning initiatives, our sales increased 9.7% and our earnings from
operations before reorganization costs increased 60.8% in the first 39 weeks of
fiscal 2000, compared with the same period in 1999.

We have developed a number of strengths that we believe create significant
competitive advantages. These include:

- an established and growing brand franchise and a loyal consumer base,
reinforced by years of investment in consistent marketing communications;

- distinctive product attributes, including a reputation for product
quality, durability, function, premium leather and classic styling;

- comprehensive internal creative direction that defines our image, delivers
a consistent message and differentiates Coach from other brands;

- a well-developed multi-channel presence allowing us to serve our customers
wherever they choose to shop; and

- recognition as a desirable resource for both personal and business
gift-giving occasions.

GROWTH STRATEGIES

Based on our established strengths, we are pursuing the following strategies
for future growth:

ACCELERATE NEW PRODUCT DEVELOPMENT. We are accelerating the development of
new products, styles and product categories that support our image as a broader
lifestyle accessories brand through:

- seasonal variations of successful styles in new colors, leathers and
fabrics that reflect current fashion trends;

- new collections, product additions and line extensions that add to our
existing product portfolio, such as the recently-launched Coach Hamptons
collection of handbags and accessories, which introduce new shapes,
fabrics and detailing to our existing handbag and accessories portfolio;

- new categories of product offerings, such as electronic accessories and
products for the home and for pets;

- continual updates to our core collections, such as a classic briefcase in
a new, lightweight travel twill; and

- licensed products with the Coach brand name, such as watches, footwear,
furniture and eyewear, and our participation in co-marketing ventures with
companies such as Toyota, Lexus, Palm and Motorola.

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Approximately 47% of our fiscal year 1999 net sales were comprised of
products introduced within the fiscal year, including new product categories and
line extensions. During fiscal year 2000, we anticipate that approximately 56%
of our net sales will be generated from products introduced within the fiscal
year.

MODERNIZE RETAIL PRESENTATION. We are modernizing our brand image by
remodeling all Coach retail stores to create a distinctive environment to
showcase our new product assortments and reinforce a consistent brand position.
Our renovated retail stores have demonstrated significantly higher comparable
store sales growth relative to unrenovated stores. For example, the 16 stores
that were renovated by November 1999 experienced comparable store sales growth
of approximately 16% for the period from November 1999 through May 2000,
compared to the same period in the prior fiscal year. Comparable store sales
growth for unrenovated stores during the same period was 7%. We have recently
expanded and rebuilt our New York and San Francisco flagship stores in our
modern format. We expect that:

- 30 Coach retail stores will reflect the new store design by June 2000,
with the remaining stores renovated by June 2003;

- approximately 80 key international locations will be converted to the new
store design by June 2001;

- 40 of our leading U.S. department store locations will be remodeled by
December 2000 and approximately 60 additional locations will be remodeled
by December 2002; and

- approximately 15 key Coach retail locations will be expanded over the next
three years.

INCREASE U.S. RETAIL STORE OPENINGS. We opened eight new U.S. retail stores
in fiscal year 2000. Over the next three years, we plan to expand our network of
106 retail sores by opening 50 new stores located primarily in high volume
markets. We believe that we have a successful retail store format that
reinforces our brand image, generates stronger sales per square foot and can be
readily adapted to different location requirements. It generally takes four to
six months from the time we take possession of a store to open it.

FURTHER PENETRATE INTERNATIONAL MARKETS. We are increasing our
international distribution and targeting international consumers generally, and
Japanese consumers in particular, to take advantage of substantial growth
opportunities. Our current network of international distributors serve markets
in Japan, Australia, the Caribbean, Korea, Hong Kong and Singapore. We have
significant opportunities to increase sales through existing and new
international distribution channels. We believe Japanese consumers represent a
major growth opportunity because they spend substantially more on handbags than
U.S. consumers on a per capita basis.

IMPROVE OPERATIONAL EFFICIENCIES. We upgraded and reorganized our
manufacturing, distribution and information systems over the past three years to
allow us to bring new and existing products to market more efficiently. While
maintaining our quality control standards, we have shifted the majority of our
manufacturing processes from owned domestic factories to sourced factories in
lower cost markets. As a result, we have increased our flexibility and lowered
our costs. In the first 39 weeks of fiscal 2000, our gross margin increased to
59.4% from 55.4% during the same period in fiscal 1999.

We intend to continue to increase efficiencies in our sourcing,
manufacturing and distribution processes by:

- strengthening the coordination of design, merchandising, product
development and manufacturing/sourcing to streamline product introduction;

- implementing a new product development process and timeline;

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- improving time to market capabilities and efficiencies;

- integrating computer-assisted design into the product design and
development process;

- establishing product development capabilities to test new materials and
new design functionality;

- expanding our organization to improve our East Asian sourcing
capabilities;

- introducing new business systems that use sales information and
demographic data to tailor the mix of product offerings at different
retail locations to consumer preferences at such locations;

- shortening product lead times to improve inventory management; and

- continuing implementation of a comprehensive supply chain management
strategy.

PROMOTE GIFT PURCHASES OF OUR PRODUCTS. We believe that a substantial
amount of our U.S. sales are gift purchases because of our higher sales during
the holiday season. We intend to further promote Coach as an appealing resource
for gift-giving occasions by developing new products well-suited for gift
selection. In addition, our marketing communication efforts, including
advertising, catalog mailings and outbound e-mails, are timed to reach consumers
before important holidays throughout the year.

CAPITALIZE ON GROWING INTEREST IN E-COMMERCE. Our on-line store, COACH.COM,
has been visited by 1.8 million consumers since its launch in October 1999, and
has already generated $3.7 million in net sales to date. Our 20 years of Coach
catalog experience gives us expertise in order fulfillment and remote retailing
that, we believe, leads to superior customer service and, consequently, high
repeat traffic. Our website meets growing consumer demand for the flexibility
and convenience of shopping over the Internet by offering a selective array of
our products.

OUR PRODUCTS

HANDBAGS. Our original business was the design, manufacture and
distribution of fine handbags, which today still accounts for approximately 56%
of our net sales. We believe women's handbags, as a category, enjoys the highest
level of brand loyalty, repeat purchase and annual expenditures within the
accessories market. Consumers in the U.S. spent approximately $5.0 billion on
handbags and accessories in 1998.

We are recognized in the global marketplace for our design innovation in
handbags. We have quarterly offerings, featuring classically inspired designs as
well as fashion trend designs. Typically, there are three to four collections
per quarter and four to seven styles per collection, depending on concept and
opportunity. We name our collections based on the attitude and design
inspiration. Our handbag retail prices generally range from $120 to $350.

THE ORIGINAL CLASSICS. Inspired by the original Coach designs, our classic
handbag collections are all "glove-tanned" leather and include the Legacy,
Signature and Voyager lines. These collections feature bound edge construction
and turn lock closures and represent approximately 45% of our handbag net sales.
Classic "icon" styles include the Willis, Station Bag, Patricia's Legacy and the
Day Pack Backpack.

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CLASSIC FASHION. From Bleecker to Whitney, the classic fashion collections
are modern updates of the original classics and represent approximately 35% of
our handbag net sales. These collections are developed with variations of
materials, construction, stitch details, hardware, handle and strap materials.
Fabrications include "glove-tanned," suede, nubuck and canvas/linen twills.

FASHION. Pinnacle and exotic leathers, fabric and seasonal product anchor
this category, which represents approximately 20% of our handbag net sales.
Mercer nylon and Hamptons twill are the current principal collections.

ACCESSORIES. Women's accessories represent approximately 12% of our net
sales and consists of wallets, cosmetic cases, key fobs, belts and hair
accessories. We recently completed a comprehensive updating of the design of the
small leather goods collections to coordinate them with our popular handbag
collections. Men's accessories also represent approximately 12% of our net sales
and consist of belts, leather gift boxes and other small leather goods, of which
electronics cases and business organizers are most popular. Our extensive
assortment of small leather goods and accessories sell at retail prices that
generally range from $30 to $300.

BUSINESS CASES. Business cases represent approximately 7% of our net sales
and generally range from $160 to $700 at retail. We have recently introduced two
new collections, Wall Street and our first nylon and leather collection,
Express. Both Wall Street and Express include computer bags. A collection geared
especially to women, Hamptons Business, will be introduced in the Fall.

LUGGAGE AND TRAVEL ACCESSORIES. The Coach luggage collection is comprised
of cabin bags, duffels, suitcases, garment bags and a comprehensive collection
of travel accessories. The collections are Travel Leather, the lightweight
Express and Hamptons Twill. We intend to launch a new leather collection,
Hamptons Leather, in Fall of this year. Luggage and travel accessories represent
approximately 5% of our net sales. Travel accessories generally range in price
from $90 to $250, while luggage generally starts at $290 and reaches
approximately $700 at retail.

TIME MANAGEMENT. A complement to our business cases and handbag
collections, our time management assortment includes folios, planners and desk
agendas in burnished water buffalo, bridle, nubuck and novelty fabrics like
denim, hair calf, tartan and vachetta. The category represents approximately 3%
of our net sales, and generally retails in the $100 to $230 price range.

OUTERWEAR, GLOVES AND SCARVES. Primarily a cold weather category, the
assortment is 60% women's and contains a fashion assortment in all three
categories. In total, this category represents approximately 2% of our net
sales. Our line of outerwear generally sells at a range of retail prices from
$250 to $890.

WATCHES. Movado Group, Inc. has been our watch licensee since 1998 and has
developed a distinctive collection of watches inspired by both our men's and
women's collections. Our watches are manufactured in Switzerland and are branded
with the Coach name and logo. They generally retail from $195 to $995. The
collection has over 35 styles ranging from the Classic and Legacy to the Mercer
diamond bangle and our pinnacle men's watch, the Morgan.

FOOTWEAR. Jimlar Corporation became our footwear licensee in 1998 after a
three year sourcing relationship. Our footwear is developed and manufactured in
Italy and is distributed through 66 locations in the U.S. We plan to expand our
distribution to over 250 locations by June 2001. 92% of the business is in
women's footwear. The collections coordinate with our handbags and employ fine
materials including calf and suede. Patent, pearlized, hair calf and exotic
leathers are also used for quality, styling and comfort. Footwear, including
boots, generally retails between $130 to $350 a pair.

FURNITURE AND HOME FURNISHINGS. Furniture was launched in the Fall of 1999
with Baker Knapp & Tubbs, Inc. as the licensee. The furniture collection is
comprised of a range of leather and suede sofas, chairs and benches and includes
our distinctive ebony wood and leather field chairs

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<PAGE>
and ottomans. The collection is sold through Baker Knapp & Tubbs showrooms and
select dealers across the U.S. The home furnishings collection was developed for
Coach retail stores with an assortment of leather frames, mirrors, boxes, trays
and pillows. This category sells at a broad range of retail prices, from $30 on
the low end of the home furnishings collection to $6,400 at the high end of the
furniture line.

EYEWEAR. Our newest licensed product line, Coach Eyewear, was launched in
April 2000. Our licensing partner in this venture is Signature Eyewear, Inc.
Sunglasses from the Coach Eyewear collection will be available in Coach retail
stores and in selected U.S. wholesale locations. Eyeglasses and sunglasses will
also be available through approximately 860 selected prescription eyewear
locations throughout the U.S. Eyewear generally sells for $120 to $210 at
retail.

In some of our categories, select core products and watches made from exotic
skins and precious metals are offered in limited quantities and are sold at
retail prices that range from approximately $300 to $15,000.

DESIGN AND MERCHANDISING

Coach's New York-based design team, led by our executive creative director,
is responsible for conceptualizing and directing the design of all Coach
products. Designers have access to our extensive archives of product designs
created over the past 50 years, which are a valuable resource for new product
concepts. Coach designers are also supported by a strong merchandising team that
analyzes sales, market trends and consumer preferences to identify business
opportunities that help guide each season's design process. Merchandisers also
rationalize the entire product line by editing, adding and deleting styles with
the objective of maximizing profitable sales across channels. Having one
centralized, internal design and merchandising group of approximately 20
professionals help us execute well-defined design concepts that are consistent
with the brand's strategic direction.

Working under the same creative leadership, our store design and
point-of-sale merchandising group creates and oversees implementation of our
store environments. From Coach shop-within-shop locations in major department
stores to our own retail and factory stores, we continue the consistent
communication of the Coach lifestyle image. Through our program to renovate all
retail store locations, which started in 1999 and is targeted for completion by
June 2003, we are introducing a contemporary environment in which to showcase
our new product assortments. Our modernized store environment, as exemplified by
our flagship store at 57(th) Street and Madison Avenue in Manhattan, has an
open, loft-like feeling, with crisp white brick walls, ebony-stained wood floors
and a timeless, uncluttered look.

Our merchandising team works in close collaboration with our licensing
partners to ensure that our licensed products, such as watches, footwear,
furniture and eyewear, are conceptualized and designed to address the intended
market opportunity and convey the distinctive perspective and lifestyle
associated with our brand. While our licensing partners employ their own
designers, we oversee the development of their collection concepts and the
design of licensed products. Licensed products are also subject to our quality
control standards and we exercise final approval for all new licensed products
prior to their sale.

MARKETING

Our marketing strategy is to deliver a consistent message every time the
consumer comes in contact with our brand, through all of our communications and
visual merchandising. Our image is created and executed internally by our
creative marketing, visual merchandising and public relations teams, which helps
ensure the consistency of the message.

In the U.S., we currently spend approximately $14 million annually for
national, regional and local advertising, primarily print and outdoor
advertising, in support of our major selling seasons. In

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Japan, we currently spend approximately $1.5 million annually for advertising,
primarily outdoor advertising at strategic locations, print advertising and
advertorials all of which is funded by our distributors. Coach catalogs and
COACH.COM also serve as effective brand communications vehicles, driving store
traffic as well as direct to consumer sales. Our co-branding partners including
Toyota, Lexus, Palm and Motorola, have together spent over $24 million in
advertising relating to our brand over the past four years, and through their
programs have strengthened the Coach brand cache. Our licensees spend an
additional $4 million annually as part of an integrated campaign, which we
control both in concept design and execution. In conjunction with promoting a
consistent global image, we use our extensive customer database and consumer
knowledge to target specific products and communications to specific consumers
to stimulate sales across all distribution channels efficiently.

In addition to our advertising budget, we engage in a wide range of direct
marketing activities, including catalogs and brochures, targeted to stimulate
sales to consumers in their preferred shopping venue. As part of our direct
marketing strategy, we use our database consisting of approximately
seven million U.S. households. Catalogs are the principal means of communication
and are sent to selected households to stimulate consumer purchases and build
brand awareness. In addition, the growing number of visitors to our COACH.COM
online store provides an opportunity to increase the size of our database and to
communicate with consumers to increase on-line and physical store sales and
build brand awareness. Approximately 1.8 million consumers have visited our
e-commerce site since its launch. Our on-line store, like our catalogs and
brochures, provides a showcase environment where consumers can browse through a
strategic offering of our latest styles and colors.

We also have a sophisticated consumer and market research capability, which
helps us assess consumer attitudes and trends and gauge likelihood of success in
the marketplace prior to product introduction. We spend approximately
$2 million per year on consumer research and related expenses.

CHANNELS OF DISTRIBUTION

DIRECT TO CONSUMER

Over the past 20 years, we have augmented our wholesale business with the
addition of significant direct to consumer distribution channels. We now have
four different channels that provide us with immediate, controlled access to
consumers: retail stores, e-commerce, direct mail and factory stores. Our direct
to consumer business will represent approximately 64% of our total sales in
fiscal year 2000, with the balance generated through our wholesale distribution
channel.

RETAIL STORES. Our retail stores establish, reinforce and capitalize on the
image of the Coach brand. We own and operate 106 retail stores in the U.S. that
are located in upscale regional shopping centers and metropolitan areas. We
operate six flagship stores, which offer the broadest assortment of our
products, in high-visibility locations such as New York and San Francisco. Our
average store size is approximately 1,900 square feet. The following table shows
the number of our retail stores and their total square footage:

<TABLE>
<CAPTION>
AT END OF FISCAL YEAR
------------------------------
1998 1999 2000
-------- -------- --------
<S> <C> <C> <C>
Retail Stores.................................. 100 101 106
Retail Square Footage.......................... 190,503 193,994 201,744
</TABLE>

Depending on their size and location, the stores present product lines that
include handbags, business cases, wallets, footwear, watches, travel and related
accessories. By June 2003, we expect to have remodeled all retail stores to our
modern design, which creates a distinctive environment that showcases our
various products. Store associates are trained to maintain high standards of

36
<PAGE>
visual presentation, merchandising and customer service. The result is a
complete statement at the retail level of our modern American style.

E-COMMERCE. We launched our e-commerce website, COACH.COM, in early
October 1999 in anticipation of the holiday season. Although this business is
relatively new, 1.8 million consumers have already visited the site, generating
$3.7 million in net sales to date. We believe we are positioned to support
strong near-term growth, with a simple, clean user interface and, based upon our
direct mail expertise, excellent order fulfillment capabilities. Like our
catalogs and brochures, our on-line store provides a showcase environment where
consumers can browse through a selected offering of our latest styles and
colors.

DIRECT MAIL. We mailed our first Coach catalog in 1980. In the last fiscal
year, we mailed at least one of our catalogs to 2.5 million
strategically-selected households, primarily from our database. We view our
catalogs as a key communications vehicle for the brand that also promotes store
traffic. As an integral component of our communications strategy, the graphics,
models and photography are upscale and modern and present the product in an
environment consistent with our brand position. Our catalogs highlight selected
products and serve as a reference for customers, whether ordering through the
catalog, making in-store purchases or purchasing over the Internet.

FACTORY STORES. Our 63 factory stores serve as an efficient means to sell
discontinued and irregular inventory outside our retail channels. These stores
operate under the Coach Factory name and are geographically positioned in
established centers that are usually greater than 100 miles from major markets.
Our average store size is approximately 2,850 square feet. The following table
shows the number of our factory stores and their total square footage:

<TABLE>
<CAPTION>
AT END OF FISCAL YEAR
------------------------------
1998 1999 2000
-------- -------- --------
<S> <C> <C> <C>
Factory Stores................................. 62 62 63
Factory Square Footage......................... 173,628 175,588 180,570
</TABLE>

Coach's factory store design and service levels support and reinforce the
brand's image. Prices are discounted from 15% to 50% below full retail prices.
Through our factory stores, we primarily target value oriented customers who
would not otherwise buy our brand.

INDIRECT CHANNELS

We began as a wholesaler to department and specialty retail stores. This
distribution channel remains very important to our overall consumer reach. We
have grown our wholesale business by working closely with our customers, both
domestic and international, to ensure a clear and consistent product
presentation. As part of our business transformation, selected shop-within-shop
locations in major department stores are being renovated to achieve the same
modern look and feel of our Coach retail stores. By the end of 2000, we expect
to have renovated 40 U.S. department store locations. We expect to complete the
renovation of approximately 50 international locations by June 2000.

U.S. WHOLESALE. Our products are currently sold in the U.S. at more than
1,400 wholesale locations. This channel represents approximately 27% of our
total sales. Recognizing the continued importance of U.S. department and
specialty stores as a distribution channel for premier accessories, we are
strengthening our longstanding relationships with these key customers through
our new products and styles and our renovation program. This channel offers
access to Coach customers who prefer shopping at department and specialty stores
or who live in geographic areas that are not large enough to support a Coach
retail store. We occupy either the number one or two position in handbags,
expressed in dollar share, for most of our U.S. wholesale customers. Our more
significant U.S. wholesale customers include Dayton's (including Marshall
Field's), Dillard's,

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Federated (including Macy's, Bloomingdale's, Rich's/Lazarus, Burdine's, Bon
Marche and Stern's), May Co. (including Lord & Taylor, Foley's, Hecht's,
Kaufman's, Robinson's/May, Famous Barr, Filene's and Meier Frank), Nordstrom and
Saks Inc.

INTERNATIONAL WHOLESALE. Our international business, which represents
approximately 10% of total sales, is generated almost entirely through wholesale
distributors and authorized retailers. We have developed relationships with a
select group of distributors who market our products through specialty
retailers, department stores, travel shopping locations, and freestanding Coach
stores in 18 countries. Our current network of international distributors serves
markets such as Japan, Australia, the Caribbean, Korea, Hong Kong and Singapore.
We have created image enhancing environments in these locations to increase
brand appeal and stimulate growth. Within the international arena, our primary
focus continues to be the Japanese consumer. We target this consumer in Japan
and in areas with significant levels of Japanese tourism. The importance of
Japanese consumers is illustrated by a comparison of consumption levels: per
capita spending on handbags in Japan is at least four times that in the U.S. Our
more significant international wholesale customers include Dickson
Concepts, Inc., Duty Free Shops, J. Osawa, Mitsukoshi and Unisia. The following
table shows the number of international retail stores, international department
store locations and other international locations at which our products are
sold:

<TABLE>
<CAPTION>
AT END OF FISCAL YEAR
------------------------------------
1998 1999 2000
-------- -------- --------
<S> <C> <C> <C>
International Retail Stores......................... 17 16 16
International Department Store Locations............ 129 132 131
Other International Locations....................... 20 20 25
</TABLE>

BUSINESS TO BUSINESS. As part of the wholesale channel of distribution, we
sell some of our products in selected military locations and through corporate
incentive and gift-giving programs.

LICENSING. In our licensing relationships, we take an active role in the
design process and control the marketing and distribution of products under the
Coach brand. Our current licensing relationships are as follows:

<TABLE>
<CAPTION>
LICENSE
EXPIRATION
CATEGORY LICENSING PARTNER INTRODUCTION DATE TERRITORY DATE
--------------------- ----------------- ----------------- --------- ----------
<S> <C> <C> <C> <C>
Watches Movado Spring '98 U.S. and Japan 2006
Footwear Jimlar Spring '99 U.S. 2008
Furniture Baker Spring '99 U.S. and Canada 2008
Eyewear Signature Spring '00 U.S. and Canada 2009
</TABLE>

Products made under license are sold through all of the channels listed above
and, with our approval, our licensees have the right to distribute Coach brand
products selectively through several other channels: shoes in department store
shoe salons, furniture through Baker's own showrooms, watches in jewelry stores
and eyewear through selected prescription eyewear providers. Our licensing
partners pay us royalties on their sales of Coach branded products. These new
venues provide additional, yet controlled, exposure of our brand.

MANUFACTURING AND SOURCING

We have refined our production capabilities in coordination with the
repositioning of our brand. By shifting our production from owned domestic
facilities to lower cost sourced facilities, we can support a broader mix of
product types, materials and a seasonal influx of new, more fashion-oriented
styles. During fiscal year 2000, we anticipate that approximately 56% of our
sales will be generated from products introduced within the fiscal year. At the
same time, we help manage total

38
<PAGE>
inventory and limit our exposure to excess and obsolete inventory by designating
a large number of the new styles as "limited editions" that are planned to be
discontinued and replaced with fresh new looks.

We have developed a flexible model to try to meet shifts in marketplace
demand and changes in consumer preferences. We use three main sources to make
our products: outsourcing with skilled partners, internal manufacturing and
production by our licensing partners. All product sources must achieve and
maintain our high quality standards, which are an integral part of the Coach
identity. We monitor compliance with our quality control standards through
on-site quality inspections at all Coach-operated or sourced facilities. One of
our keys to success lies in the rigorous selection of raw materials. We have
long-standing relationships with purveyors of fine leathers and hardware. As we
have shifted more of our production to external sources, we require that these
same raw materials are used in all of our products, wherever they are made.

We have expanded our sourcing capabilities to supply about 65% of our fiscal
year 2000 non-licensed product needs from independent manufacturers, measured as
a percentage of total units produced. We source from a variety of countries,
including China, Costa Rica, Mexico, India, the Dominican Republic, Italy,
Spain, Hungary and Turkey. We operate a European Sourcing and Product
Development organization based in Florence, Italy which works closely with our
New York-based design team. Our broad-based multi-country sourcing strategy is
designed to optimize the mix of cost, lead times and construction capabilities.
We carefully balance our sourcing commitments to a limited number of "better
brand" partners with demonstrated integrity, quality and reliable delivery. No
one vendor provides more than 20% of our total requirements. Before partnering
with a vendor, Coach evaluates each facility by conducting a quality and
business practice standards audit. Periodic evaluations of existing,
previously-approved facilities are conducted on a random basis. We believe that
all of our sourcing partners are in compliance with our integrity standards.

We currently operate two manufacturing facilities in leased facilities. Our
107,000 square foot Medley, Florida facility currently contributes approximately
13% of production. Our 66,000 square foot facility in Lares, Puerto Rico
currently produces about 22% of our needs. We continue to evaluate the cost
effectiveness of these facilities, as we expand North American Free Trade
Agreement and Caribbean Basin Initiatives partners at a lower cost and with
comparable quality assurance and leadtimes to market.

DISTRIBUTION

In July 1999, we consolidated our worldwide warehousing and distribution
functions into one location in Jacksonville, Florida. This highly automated,
computerized 560,000 square foot facility uses a bar code scanning warehouse
management system. Our distribution center employees use handheld optical
scanners to read product bar codes, which allows us to more accurately process
and pack orders, track shipments, manage inventory and generally provide better
service to our customers. Our products are primarily shipped via United Parcel
Service and common carriers to our retail stores and wholesale customers and via
UPS direct to consumers.

The average order processing time is 2.1 days. During our peak season in
1999, the second fiscal quarter, we shipped approximately 96% of all orders
complete. Because of our 20 years of experience shipping orders to individual
catalog customers, we believe we are well positioned to support the order
fulfillment requirements of our growing business, especially business generated
through our website.

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<PAGE>
MANAGEMENT INFORMATION SYSTEMS

The foundation of our information systems is our Enterprise Resource
Planning system, referred to as an ERP system. Implemented in 1997, this fully
integrated system supports all aspects of finance and accounting, procurement,
inventory control, sales and store replenishment resulting in increased
efficiencies, improved inventory control and a better understanding of consumer
demand. The system functions as a central repository for all of our
transactional information, resulting in increased efficiencies and greater
inventory control. This system is fully scalable to accommodate rapid growth.

Complementing our ERP system are several other newly-implemented system
solutions, each of which, we believe, is well-suited for our needs. Our data
warehouse system summarizes our transaction information and provides a single
platform for all management reporting. Our supply chain management system
supports corporate sales and inventory functions, creating a monthly demand plan
and reconciling production/procurement with financial plans. Product fulfillment
is facilitated by our highly automated warehouse management system and
electronic data interchange system, while the unique requirements of our catalog
and Internet businesses are supported by our custom direct sales system.
Finally, our point-of-sale system supports all in-store transactions,
distributes management reporting to each store, and collects sales and payroll
information on a daily basis. This daily collection of store sales and inventory
information results in early identification of business trends and provides a
detailed baseline for store inventory replenishment. All complementary systems
are integrated with the central ERP system.

COMPETITION

We face intense competition in the product lines and markets in which we
compete. Our products compete with other branded products within their product
category and with private label products sold by retailers, including some of
our customers. In our wholesale business, we compete with numerous
manufacturers, importers and distributors of handbags, accessories and other
products for the limited space available for the display of such products to the
consumer. Moreover, the general availability of contract manufacturing capacity
allows new entrants easy access to the markets in which we compete, which may
increase the number of our competitors and adversely affect our competitive
position and our business.

In varying degrees, depending on the product category involved, we compete
on the basis of style, price, customer service, quality, and brand prestige and
recognition, among other considerations. Some of our competitors have achieved
significant recognition for their brand names or have substantially greater
financial, distribution, marketing and other resources than us. However, we
believe that we have significant competitive advantages because of our brand
recognition and the acceptance of our brand name by consumers.

TRADEMARKS AND PATENTS

We own all of the material trademark rights used in connection with the
production, marketing and distribution of all of our products, both in the U.S.
and in the other countries in which our products are principally sold. We own
and maintain worldwide registrations for trademarks in all relevant classes of
products in each of the countries in which our products are sold. Our major
trademarks include COACH, COACH AND LOZENGE design and COACH AND TAG design and
we have applications pending for a proprietary "C" SIGNATURE FABRIC design. In
addition, several of our products are covered by design patents or patent
applications. We aggressively police our trademarks and trade dress, and pursue
infringers both domestically and internationally. We also pursue counterfeiters
domestically and internationally through leads generated internally, as well as
through our network of investigators, the Coach hotline and business partners
around the world.

40
<PAGE>
EMPLOYEES

As of June 1, 2000, we had approximately 3,500 employees, approximately 425
of which were covered by collective bargaining agreements. Of the total,
approximately 1,520 are engaged in retail selling and administration positions
and approximately 1,500 are engaged in manufacturing, sourcing or distribution
functions. The remaining employees are engaged in other aspects of our business.
We believe that our relations with our employees are good, and we have never
encountered a strike or significant work stoppage.

GOVERNMENT REGULATION

Many of our imported products are subject to existing or potential duties,
tariffs or quotas that may limit the quantity of products that we may import
into the U.S. and other countries or impact the cost of such products. To date,
we have not been restricted by quotas in the operation of our business and
customs duties have not comprised a material portion of the total cost of a
majority of our products. In addition, we are subject to foreign governmental
regulation and trade restrictions, including U.S. retaliation against certain
prohibited foreign practices, with respect to our product sourcing and
international sales operations.

LEGAL PROCEEDINGS

We are involved in various routine legal proceedings incident to the
ordinary course of our business. We believe that the outcome of all pending
legal proceedings in the aggregate will not have a material adverse effect on
our business or financial condition.

PROPERTIES

The following table sets forth the location, use and size of our
manufacturing, distribution and corporate facilities as of June 1, 2000, all of
which are leased. The leases expire at various times through 2015, subject to
renewal options.

<TABLE>
<CAPTION>
APPROXIMATE
LOCATION USE SQUARE FOOTAGE
-------- --- --------------
<S> <C> <C>
516 West 34(th) Street, New
York Corporate 140,000
Carlstadt, New Jersey Corporate & Product Development 93,000
Jacksonville, Florida Distribution & Customer Service 560,000
Medley, Florida Manufacturing 107,000
Lares, Puerto Rico Manufacturing 66,000
Florence, Italy Product Development 16,000
</TABLE>

We also occupy 106 retail and 63 factory leased retail stores located in the
U.S. We consider our properties to be in good condition generally and believe
that our facilities are adequate for our operations and provide sufficient
capacity to meet our anticipated requirements.

41
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information regarding each of our executive
officers and directors as of June 1, 2000:

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Lew Frankfort.................. 54 Chairman, Chief Executive Officer and Director

Keith Monda.................... 53 Executive Vice President, Chief Operating
Officer and Director

David DeMattei................. 43 President, Retail Division

Reed Krakoff................... 36 President, Executive Creative Director

Richard Randall................ 62 Senior Vice President and Chief Financial
Officer

Carole Sadler.................. 40 Senior Vice President, General Counsel
and Secretary

Felice Schulaner............... 39 Senior Vice President, Human Resources

Gary Grom...................... 53 Director

Richard Oberdorf............... 47 Director
</TABLE>

LEW FRANKFORT has served as Chairman and Chief Executive Officer of Coach
since November 1995, and as Senior Vice President of Sara Lee since
January 1994. He has served as a member of our board of directors since June 1,
2000, the date of our incorporation. Mr. Frankfort was appointed President and
Chief Executive Officer of the Sara Lee Champion, Intimates & Accessories group
in January 1994, and held this position through November 1995. From
September 1991 through January 1994, Mr. Frankfort held the positions of
Executive Vice President, Sara Lee Personal Products and Chief Executive Officer
of Sara Lee Accessories. Mr. Frankfort was appointed President of Coach in
July 1985, after Sara Lee acquired Coach, and held this position through
September 1991. Mr. Frankfort joined Coach in 1979 as Vice President of New
Business Development. Prior to joining Coach, Mr. Frankfort held various New
York City government management positions and served as Commissioner, New York
City Agency for Child Development. Mr. Frankfort holds a Bachelor of Arts degree
from Hunter College and an MBA in Marketing from Columbia University.

KEITH MONDA was appointed Executive Vice President and Chief Operating
Officer of Coach in June 1998. He has served as a member of our board of
directors since June 1, 2000, the date of our incorporation. Prior to joining
Coach, Mr. Monda served as Senior Vice President, Finance & Administration and
Chief Financial Officer of Timberland Company from December 1993 until
May 1996, and was promoted to, and held the position of, Senior Vice President,
Operations from May 1996 until January 1998. From May 1990 to December 1993,
Mr. Monda served as Executive Vice President, Finance and Administration of J.
Crew. Mr. Monda holds Bachelor of Science and Master of Arts degrees from Ohio
State University.

DAVID DEMATTEI joined Coach as President, Retail Division in July 1998. From
June 1995 to April 1998, Mr. DeMattei served as Retail President of J. Crew, and
from January 1994 to January 1995 he served as Chief Financial Officer of the
Nature Company, a division of CML Group. From January 1993 to January 1994, he
served as President of Banana Republic Retail Stores. From January 1983 through
January 1993, Mr. DeMattei held various positions at Gap, Inc.,

42
<PAGE>
including Chief Financial Officer. Mr. DeMattei holds a Bachelor of Science
degree in Business Administration from the University of San Francisco.

REED KRAKOFF was appointed President, Executive Creative Director in
September 1999 after joining Coach as Senior Vice President and Executive
Creative Director in December 1996. Prior to joining Coach, Mr. Krakoff served
as Senior Vice President, Marketing, Design & Communications from January 1993
until December 1996, and as Head Designer, Sportswear from April 1992 until
January 1993 at Tommy Hilfiger USA, Inc. From July 1988 through April 1992,
Mr. Krakoff served as a Senior Designer in Design and Merchandising for
Polo/Ralph Lauren. Mr. Krakoff holds an A.A.S. degree in Fashion Design from
Parsons School of Design and a Bachelor of Arts degree in Economics and Art
History from Tufts University.

RICHARD RANDALL joined Coach as Senior Vice President and Chief Financial
Officer in May 2000. Mr. Randall previously served as Senior Vice President and
Chief Financial Officer of Lillian Vernon Corporation from September 1998
through April 2000. From October 1997 through March 1998, Mr. Randall served as
Executive Vice President of Mondo, Inc. From 1979 through 1997, Mr. Randall
served as Chief Financial Officer at Salant Corporation, Heron Communications,
Chappell Music Publishers and Warner Cosmetics. Mr. Randall is a Certified
Public Accountant and holds a Bachelor of Business Administration degree in
accounting from City College of New York. Mr. Randall is a member of the
American Institute of Certified Public Accountants and the New York State
Society of Certified Public Accountants. In December 1998, fifteen months after
his departure from Salant Corporation, Salant Corporation commenced bankruptcy
proceedings which concluded in April 1999.

CAROLE SADLER has served as Senior Vice President, General Counsel and
Secretary since May 2000. She joined Coach as Vice President, Chief Counsel in
March 1997. From April 1991 until February 1997, Ms. Sadler was Vice President
and Associate General Counsel of Saks Fifth Avenue. From September 1984 until
March 1991, Ms. Sadler practiced law as a litigation associate in New York City,
most recently at the firm of White & Case, and prior to that at Paskus Gordon &
Mandel and Mound Cotton & Wollan. Ms. Sadler holds a Juris Doctor degree from
American University, Washington College of Law, and a Bachelor of Arts degree,
CUM LAUDE, in American Studies from Smith College.

FELICE SCHULANER joined Coach as Senior Vice President, Human Resources in
January 2000. Prior to joining Coach, Ms. Schulaner served as Senior Vice
President, Human Resources of Optimark Technologies from February 1999 through
December 1999 and as Senior Vice President, Human Resources of Salant
Corporation from July 1997 through February 1999. Ms. Schulaner was Vice
President, Worldwide Recruitment & Selection at American Express from July 1996
until June 1997. From 1990 through 1996, she served in various other human
resources positions at American Express, including Vice President, Human
Resources Reengineering, and, from 1986 until 1990, Ms. Schulaner held human
resources positions at Macy's Northeast in New York City. Ms. Schulaner holds a
Bachelor of Arts degree from New College of the University of South Florida. In
December 1998, Salant Corporation commenced bankruptcy proceedings which
concluded in April 1999.

GARY GROM has served as Senior Vice President of Human Resources at Sara Lee
since July 1992. He has served as a member of our board of directors since
June 1, 2000, the date of our incorporation. From June 1985 until June 1992,
Mr. Grom held various human resource positions at Sara Lee, including Senior
Vice President of Sara Lee Packaged Meats and Executive Director of
Compensation, Benefits and Manpower Planning. Mr. Grom holds a Bachelor of
Science degree in Business Administration from the University of Wisconsin -
LaCrosse.

RICHARD OBERDORF has served as Vice President of Business Growth and
Development for Sara Lee since September 1997. He has served as a member of our
board of directors since June 1,

43
<PAGE>
2000, the date of our incorporation. From September 1994 to September 1997,
Mr. Oberdorf served as Chief Financial Officer of Sara Lee Personal Products.
From July 1987 to September 1994, Mr. Oberdorf held various positions at Sara
Lee and its divisions, including Chief Financial Officer of Playtex and Sara Lee
Personal Products Pacific Rim. Prior to joining Sara Lee, Mr. Oberdorf was
Senior Tax Manager with Price Waterhouse. Mr. Oberdorf holds an Accounting
degree from Georgetown University.

BOARD STRUCTURE AND COMPENSATION

In addition to the four directors who currently comprise our board of
directors, we intend to name three additional outside directors who will be
appointed to our board prior to the completion of this offering. We anticipate
that all three of these additional outside directors will comprise our audit
committee and our compensation and employee benefits committee.

Messrs. Grom and Oberdorf are both employees of Sara Lee. Each of
Messrs. Grom and Oberdorf plan to resign as a member of our board at the time
Sara Lee ceases to own a majority of our outstanding capital stock.

AUDIT COMMITTEE

Prior to the completion of this offering, we intend to establish an audit
committee. Our audit committee will review our auditing, accounting, financial
reporting and internal control functions and will make recommendations to the
board of directors for the selection of independent accountants. In addition,
the committee will review our accounting principles and financial reporting, our
compliance with foreign trade regulations as well as the independence of and the
non-audit services provided by our independent accountants. In discharging its
duties, the audit committee will:

- review and approve the scope of the annual audit and the independent
accountant's fees;

- meet independently with our internal auditing staff, our independent
accountants and our senior management; and

- review the general scope of our accounting, financial reporting, annual
audit and internal audit program, matters relating to internal control
systems and the results of the annual audit.

COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE

Prior to the completion of this offering, we intend to establish a
compensation and employee benefits committee. Our compensation and employee
benefits committee will determine, approve and report to the board of directors
on all elements of compensation for our elected officers, including targeted
total cash compensation and long-term equity based incentives.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

For our fiscal year ended July 3, 1999, we operated as a division of Sara
Lee and had no board of directors and no compensation committee. The
compensation and employee benefits committee of Sara Lee or properly authorized
officers of Sara Lee made all compensation decisions with respect to our
executive officers. After this offering, our compensation and employee benefits
committee will make all compensation decisions regarding our executive officers.
None of our executive officers will serve on the compensation committee or board
of directors of any other company of which any of the members of our
compensation and employee benefits committee or our board of directors is an
executive officer.

44
<PAGE>
DIRECTOR COMPENSATION

Directors who are Coach or Sara Lee employees receive no fees for their
services as directors. Our non-employee directors will receive an annual
retainer of $30,000 and an annual grant of 5,000 options to purchase shares of
our common stock. The exercise price of these options will equal the fair market
value of our common stock on the date of grant. Non-employee directors can elect
to receive common stock, options to purchase common stock, or a combination of
common stock and options, in lieu of all or any portion of the $30,000 annual
retainer. In addition, non-employee directors may elect to defer part or all of
their annual cash retainer under our Directors' Deferred Compensation Plan
described below. Deferred amounts are invested in a stock equivalent account.
Chairpersons of our board committees will receive an additional $5,000 annually.
At the time of the offering, we intend to grant an option to purchase
5,000 shares of our common stock, at the offering price, to each of our
non-employee directors.

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

All of our common stock is currently owned by Sara Lee, and thus none of our
officers or directors own any of our common stock. To the extent our directors
and officers own shares of Sara Lee common stock at the time Sara Lee effects
any exchange or distribution of our common stock, our directors and officers
will participate in the exchange or distribution on the same terms as other
holders of Sara Lee common stock.

The following table sets forth the number of shares of Sara Lee common stock
beneficially owned on June 1, 2000 by each director, each of the executive
officers named in the Summary Compensation Table below and all of our directors
and executive officers as a group. Except as otherwise noted, the individual
director or executive officer or their family members has sole voting and
investment power with respect to such stock. The total number of shares of Sara
Lee common stock outstanding as of June 1, 2000 was 891,873,323.

<TABLE>
<CAPTION>
SHARES OF SARA LEE
BENEFICIALLY OWNED
----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE
------------------------ --------- ----------
<S> <C> <C>
Lew Frankfort(1)............................................ 450,352 *

Keith Monda(2).............................................. 22,399 *

David DeMattei(3)........................................... 17,751 *

Reed Krakoff(4)............................................. 31,647 *

Carole Sadler(5)............................................ 8,000 *

Gary Grom(6)................................................ 524,863 *

Richard Oberdorf(7)......................................... 167,170 *

All directors and officers as a group (9 people)............ 1,222,182 *
</TABLE>

--------------

* Less than 1%.

(1) Includes 375,873 shares of common stock that may be purchased within
60 days of June 1, 2000 pursuant to the exercise of options.

(2) Includes 16,666 shares of common stock that may be purchased within 60 days
of June 1, 2000 pursuant to the exercise of options.

(3) Includes 16,666 shares of common stock that may be purchased within 60 days
of June 1, 2000 pursuant to the exercise of options.

45
<PAGE>
(4) Includes 30,666 shares of common stock that may be purchased within 60 days
of June 1, 2000 pursuant to the exercise of options.

(5) Represents common stock that may be purchased within 60 days of June 1, 2000
pursuant to the exercise of options.

(6) Includes 325,754 shares of common stock that may be purchased within
60 days of June 1, 2000 pursuant to the exercise of options.

(7) Includes 131,503 shares of common stock that may be purchased within
60 days of June 1, 2000 pursuant to the exercise of options.

EXECUTIVE COMPENSATION

The following table sets forth compensation information for our chief
executive officer and our four next most highly compensated executive officers
for the year ended July 3, 1999. All information set forth in this table
reflects compensation paid to these individuals by Sara Lee for services
performed for the Coach business during the fiscal year ended July 3, 1999.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------- ------------------------
NUMBER OF
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION AWARDS(1) OPTIONS COMPENSATION(2)
------------------------------ --------- --------- ------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Lew Frankfort ................ $450,000 $399,150 -- $201,600 158,124 $43,925
Chairman and Chief Executive
Officer

Keith Monda .................. 350,000 286,907 $639,470(3) 100,800 50,000 5,347
Executive Vice President and
Chief Operating Officer

David DeMattei ............... 425,000 515,308 -- 144,000 50,000 3,013
President, Retail Division

Reed Krakoff ................. 336,667 260,496 -- 100,800 24,000 19,667
President, Executive
Creative Director

Carole Sadler ................ 170,000 91,460 -- -- 6,000 7,367
Senior Vice President,
General Counsel and
Secretary
</TABLE>

----------------

(1) Reflects the market value of restricted stock units on the date of grant.
Market value was calculated based on $24 per share and the following number
of restricted stock units: Lew Frankfort, 8,400; Keith Monda, 4,200; David
DeMattei, 6,000; and Reed Krakoff, 4,200. Dividends on the restricted stock
units are escrowed during the three-year performance cycle. Dividends and
interest on the escrowed dividends are distributed at the end of the
performance cycle in the same proportion as the restrictions on the
restricted stock units lapse. The restrictions lapse three years from the
grant date if, and only to the extent that, certain performance goals or
service requirements are met. To the extent the performance goals or service
requirements are not attained, the restricted stock units, the escrowed
dividends and interest will be forfeited.

(2) Includes payment by Sara Lee of the following amounts for life insurance on
behalf of each of the executive officers above: $15,853 for Lew Frankfort;
$5,347 for Keith Monda; $3,013 for David DeMattei; $1,467 for Reed Krakoff;
and $1,952 for Carole Sadler. Includes Sara Lee's contributions under its
employee stock ownership plan and supplemental retirement benefit plan of
the following amounts on

46
<PAGE>
behalf of the following executive officers contained in the table above:
$28,072 for Lew Frankfort; $18,200 for Reed Krakoff; and $5,415 for Carole
Sadler.

(3) Consists of a $639,470 relocation allowance paid to Mr. Monda.

The following table shows all grants of options to acquire shares of Sara
Lee common stock made to the executive officers named above in the Summary
Compensation Table during the fiscal year ended July 3,1999.

SARA LEE OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE
OPTIONS AT ASSUMED ANNUAL RATES
NUMBER OF GRANTED OF STOCK PRICE
SECURITIES TO SARA LEE APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES TERM(2)
OPTIONS IN FISCAL EXERCISE PRICE ---------------------------
NAME GRANTED YEAR PER SARA LEE SHARE(1) EXPIRATION DATE 5% 10%
---- ---------- ----------- --------------------- --------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Lew Frankfort........ 60,000 * $24.03 August 2008 $907,682 $2,300,789
21,214(3) * 28.22 August 2005 237,879 552,224
26,046(3) * 28.22 August 2006 343,128 818,498
50,864(3) * 28.22 August 2007 775,351 1,901,784

Keith Monda.......... 50,000 * 24.03 August 2008 756,402 1,917,324

David DeMattei....... 50,000 * 24.03 August 2008 756,402 1,917,324

Reed Krakoff......... 24,000 * 24.03 August 2008 363,073 920,315

Carole Sadler........ 6,000 * 24.03 August 2008 90,768 230,079
</TABLE>

----------------

* Less than .01%. The total options granted by Sara Lee in fiscal 1999 was
17,172,000.

(1) Exercise price equals 100% of the fair market value of the common stock on
the date of grant. Each option expires 10 years after the grant date, other
than Mr. Frankfort's restoration stock options described in more detail in
footnote (3) below. The options generally become exercisable in three equal
annual installments, on the first three anniversary dates of the date of
grant. No option may be exercised until the expiration of one year from the
date of grant. In the event of a change in control of Sara Lee, the
compensation and employee benefits committee of Sara Lee may provide for
appropriate adjustments, including acceleration of the vesting period.

(2) Potential realizable values are net of exercise price, but before deduction
of taxes associated with exercise. A zero percent gain in stock price will
result in zero dollars for the optionee. The dollar amounts indicated in
these columns are the result of calculations assuming growth rates required
by the rules of the Securities and Exchange Commission. These growth rates
are not intended to forecast future appreciation, if any, of the price of
Sara Lee common stock.

(3) These are restoration stock options, which are granted when an executive
exercises an existing option by surrendering Sara Lee common stock. The
grant of a restoration stock option upon the exercise of an existing option
is intended to promote increased employee share ownership by encouraging the
early exercise of existing options. The grant of a restoration stock option
does not result in an increase in the total combined number of shares and
options held by an employee.

47
<PAGE>
The following table shows aggregate exercises of options to purchase Sara
Lee common stock made during the fiscal year ended July 3, 1999 by the executive
officers named above in the Summary Compensation Table.

AGGREGATED SARA LEE OPTION EXERCISES
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL-YEAR-END FISCAL YEAR-END(1)
ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ---------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Lew Frankfort........... 121,002 $1,275,586 253,456 253,336 $15,102 $478,339
</TABLE>

----------------

(1) Options are "in-the-money" at fiscal year-end if the market value of the
underlying securities on that date exceeds the exercise price of the
options. The amounts set forth represent the difference between the closing
price of Sara Lee common stock of $22.50 on the New York Stock Exchange on
July 3, 1999, less the option exercise price payable for those shares.

SEVERANCE POLICY

Sara Lee has a severance policy for all corporate officers which covers
fiscal year 2000. Upon the consummation of this offering, Coach intends to adopt
its own severance policy and Coach employees will no longer be covered by Sara
Lee's severance policy. Sara Lee's policy provides that if an officer's
employment is terminated without cause, the officer will receive from 12 to
24 months of salary as severance payments. The amount of actual severance
payments depends on the officer's position, length of service and age. Under
this policy, officers also receive a partial payment under the incentive plans
applicable to the fiscal year in which the termination occurs. The terminated
officer's participation in Sara Lee's insurance plans, except for disability
insurance (which ends on the date of termination of employment), will continue
for the same number of months for which he or she is receiving severance
payments. Severance payments terminate if the terminated officer becomes
employed by a competitor of Sara Lee.

RETIREMENT PLANS

The following table shows the approximate annual pension benefits payable
upon retirement under Sara Lee's qualified pension plan, as well as a
nonqualified supplemental benefit plan. Executive officers of Coach are eligible
to participate in Sara Lee's retirement plans until the earlier of the date that
Sara Lee effects an exchange or other distribution of the Coach common stock
that it owns or until Coach adopts its own retirement plans. The compensation
covered by Sara Lee's pension plans is based on an employee's annual salary and
bonus. The amounts payable under the pension plans are computed on the basis of
a straight-life annuity and are not subject to deduction for Social Security
benefits or other amounts. Under the supplemental benefit plan, accrued benefits
having a present value exceeding $100,000 for participants age 55 and older and
$300,000 for participants who have not yet attained the age of 55 are funded
with periodic payments by Sara Lee to individual trusts established by the
participants.

48
<PAGE>
ESTIMATED ANNUAL NORMAL RETIREMENT PENSION
BASED UPON THE INDICATED CREDITED SERVICE

<TABLE>
<CAPTION>
FINAL
AVERAGE
COMPENSATION 10 YEARS 15 YEARS 25 YEARS 35 YEARS
------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$ 300,000 $ 52,500 $ 78,750 $131,250 $183,750
350,000 61,250 91,875 153,125 214,375
400,000 70,000 105,000 175,000 245,000
450,000 78,750 118,125 196,875 275,625
500,000 87,500 131,250 218,750 306,250
600,000 105,000 157,500 262,500 367,500
750,000 131,250 196,875 328,125 459,375
1,000,000 175,000 262,500 437,500 612,500
</TABLE>

As of June 1, 2000, the executive officers had the following years of
credited service under the pension plans: Lew Frankfort, 14 years and
10 months; Keith Monda, one year and 11 months; David DeMattei, one year and
10 months; Reed Krakoff, three years and five months; and Carole Sadler, three
years and two months.

STOCK OWNERSHIP GUIDELINES FOR EXECUTIVE OFFICERS

Our board of directors believes that the interests of our executive officers
and other senior management will be more closely aligned with the interests of
our stockholders if our executive officers and other senior management hold a
significant investment in our common stock. To ensure significant stock
ownership, our board of directors has adopted stock ownership guidelines that
encourage 26 of our employees, at the vice president level and above, to own a
specified number of our securities. The ownership guidelines range from 150,000
shares for our Chief Executive Officer to 20,000 shares for each of our Vice
Presidents. At the anticipated initial public offering price of $ , our
Chief Executive Officer will be required to hold common stock with a value of at
least $ . Employees who are subject to the stock ownership guidelines will
have several years to achieve compliance. Shares covered by deferred stock units
and shares allocated under our 401(k) plan or other benefit plans will count
towards compliance with the stock ownership guidelines.

To facilitate our executives' achievement of our stock ownership guidelines,
we intend to offer to selected executive employees options to purchase up to an
aggregate of shares of our common stock, subject to the surrender and
cancellation of previously granted options to purchase shares of Sara Lee common
stock. The number and exercise prices of these Coach options will be determined
in a manner meant to reflect the difference between the fair market values of
Sara Lee common stock and Coach common stock on the date of the consummation of
this offering. The Coach options will maintain the same vesting and exercise
provisions as the Sara Lee options surrendered and cancelled. However, the Coach
options will not be exercisable until the earlier of one year after this
offering or the date on which Sara Lee ceases to own a majority of our capital
stock; provided that in no event will these options be exercisable within six
months of this offering. Sara Lee restricted stock units previously granted to
these executive employees also may be converted into Coach restricted stock
units, which will retain the same service-based vesting requirements.

49
<PAGE>
TREATMENT OF SARA LEE OPTIONS AND RESTRICTED STOCK UNITS UPON AN EXCHANGE OR
OTHER DISTRIBUTION

We intend to assume any remaining Sara Lee options held by our employees on
the date of any exchange or other distribution of our common stock by Sara Lee
and convert them into equivalent Coach options. As of June 1, 2000, our
employees held options to purchase shares of Sara Lee common stock,
excluding options held by the selected executive employees who are entitled to
surrender their Sara Lee options and receive Coach options when this offering is
completed.

Under several Sara Lee long-term performance or restricted stock plans, some
of our key employees were granted restricted stock unit awards. As of June 1,
2000, our employees held unvested Sara Lee performance-based restricted
stock units and unvested Sara Lee service-based restricted stock units. At
the time of the offering, we intend to offer to selected executive employees the
right to surrender their Sara Lee service-based restricted stock units and
receive Coach service-based restricted stock units that have the same vesting
requirements. Sara Lee performance-based restricted stock units will not be
eligible for conversion at the time of this offering. If Sara Lee effects an
exchange or distribution of its Coach shares prior to expiration of the vesting
cycle applicable to the outstanding Sara Lee restricted stock units, all of the
unvested Sara Lee restricted stock units automatically will convert at the time
of the exchange or distribution into Coach restricted stock units.

2000 STOCK INCENTIVE PLAN

Our board of directors adopted the 2000 Stock Incentive Plan, referred to as
the 2000 Plan, in , 2000, and we intend to obtain the approval of the 2000
Plan from our sole shareholder, Sara Lee, prior to the completion of this
offering. The 2000 Plan provides for the grant of incentive stock options,
non-qualified stock options, stock appreciation rights and other stock awards to
our employees and non-employee directors.

NUMBER OF SHARES OF COMMON STOCK AVAILABLE UNDER THE 2000 PLAN. A total of
shares of our common stock have been reserved for issuance pursuant to the
2000 Plan. No options to acquire shares of common stock or other awards have
been issued as of June 1, 2000; however, in connection with this offering, we
intend to grant to our employees options to purchase approximately shares
of our common stock at the initial offering price. None of these options will be
exercisable for one year after this offering. The number of shares of common
stock available under the 2000 Plan will be proportionately adjusted in the
event of any stock dividend, stock split, combination or exchange of securities,
merger, consolidation, recapitalization, spin-off or other distribution (other
than normal cash dividends). Any awards under the 2000 Plan that are made as a
result of conversion by our employees of outstanding awards administered under
the 2000 Plan, or in connection with our acquisition, will not reduce the number
of shares available for issuance under the 2000 Plan.

ADMINISTRATION OF THE 2000 PLAN. The compensation and employee benefits
committee of our board of directors will administer the 2000 Plan. Until Sara
Lee effects an exchange or other distribution of the Coach common stock it owns,
we have agreed to adopt procedures satisfactory to Sara Lee to ensure that the
issuance of shares of our common stock under the 2000 Plan will not cause Sara
Lee's ownership of our common stock to fall below 80%, which is necessary to
preserve the tax-free status of such a transaction. Under these procedures, we
may be required to repurchase shares of our common stock on the open market as
options are exercised. In the case of any award under the 2000 Plan intended to
qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended, our
compensation and employee benefits committee will consist solely of two or more
"outside

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directors" within the meaning of Section 162(m) of the Code. Our committee has
the power to determine the terms of the awards granted, including the exercise
price, the number of shares subject to each option, the exercisability of the
options and the form of consideration payable upon exercise.

OPTIONS. The exercise price of all options granted under the 2000 Plan will
be at least equal to the fair market value of our common stock on the grant
date; provided, that options granted upon the involuntary conversion of our
employees' Sara Lee options or in connection with the acquisition of a business
may be granted with a purchase price that is intended to preserve the economic
value of the option being replaced, but not less than the exercise price of the
Sara Lee option that was converted. The committee may grant options that provide
for the grant of a restoration option. If a person exercises an option that
contains a restoration option provision and pays the exercise price by tendering
shares of our common stock to us, or satisfies the minimum tax-withholding
obligations by authorizing us to withhold shares that would be granted under the
option, the person exercising the option may receive a restoration option for
the number of shares tendered or withheld. The committee determines all other
terms of options.

No optionee may be granted an option to purchase more than shares over
the term of the 2000 Plan, except that in the calendar year that an optionee
begins service as the Chief Executive Officer, the optionee may be granted
options to purchase up to 500,000 shares. Neither of these limits will include
restoration options. The number of shares for which restoration options may be
granted to any optionee in any calendar year may not exceed 500,000 shares.

After termination of employment or service as a director, an optionee may
exercise a vested option for the period of time stated in the option agreement.
Generally, if termination is due to (1) death or disability, vesting accelerates
and the option will remain exercisable until the earlier of its expiration date
or 5 years, (2) retirement, vesting continues and the option will remain
exercisable until its expiration date, (3) involuntary termination under which
severance benefits are payable, a vested option will remain exercisable until
the earlier of its expiration date or 90 days after the last day of the period
for which severance benefits are payable, or (4) cause, the option will
terminate in its entirety on the date of termination. In all other cases, a
vested option will generally remain exercisable for 90 days; however, an option
may never be exercised later than the expiration of its term. Certain officers
and employees may be required to repay all financial gains realized from
exercising all or a portion of an option within the six-month period preceding
certain conduct that is contrary or harmful to our interests, such as accepting
employment with one of our competitors.

STOCK APPRECIATION RIGHTS. All stock appreciation rights, or SARs, granted
under the 2000 Plan generally represent a right to receive payment, in cash,
stock, or a combination of cash and stock, equal to the excess of the fair
market value of a specified number of shares of common stock on the exercise
date over the fair market value of such shares on the grant date.

STOCK AWARDS. A stock award granted under the 2000 Plan represents an award
made in or valued in whole or in part by reference to shares of common stock and
may be payable in whole or in part in stock. The committee determines the
conditions and restrictions of all stock awards granted under the 2000 Plan. No
more than 20% of the shares reserved for issuance under the 2000 Plan may be
issued as a stock award.

PAYMENT DEFERRALS. The committee may require or permit an optionee to defer
the receipt of shares or cash or other property upon settlement of awards. The
committee may also allow the payment or crediting of earnings on deferred
amounts.

TRANSFERABILITY OF OPTIONS, SARS AND STOCK AWARDS. The 2000 Plan generally
does not allow for the transfer of options, SARs or stock awards other than by
will or the laws of descent and

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distribution pursuant to approved beneficiary designation procedures. Only the
employee may exercise his or her options during his or her lifetime.

ADJUSTMENTS IN CONNECTION WITH A CHANGE IN CONTROL. In contemplation of or
in the event of a change in control, the committee may provide for appropriate
adjustments, including the acceleration of vesting and the settlement or
substitution of awards. If a change of control occurs prior to the time Sara Lee
effects an exchange or distribution of our common stock, one-half of all
unvested options will vest automatically. Any exchange or distribution of our
common stock by Sara Lee should not constitute a change in control.

AMENDMENT OF THE 2000 PLAN. Our board of directors has the authority to
amend, suspend or terminate the 2000 Plan, provided it does not adversely affect
any award previously granted under our 2000 Plan without the affected award
holder's consent.

EXECUTIVE DEFERRED COMPENSATION PLAN

In June 2000, our board of directors adopted the Executive Deferred
Compensation Plan, referred to as the Deferred Compensation Plan. The Deferred
Compensation Plan has been approved by our sole stockholder, Sara Lee. The
Deferred Compensation Plan is not a tax-qualified retirement plan. The Deferred
Compensation Plan is a plan that permits all officers and key employees at or
above the director level to elect to defer all or a portion of their annual
bonus or annual base salary. A participant may also elect to transfer his or her
deferrals under the Sara Lee Executive Deferred Compensation Plan to the
Deferred Compensation Plan. All amounts deferred under the Deferred Compensation
Plan are represented by deferred stock units, which represent the right to
receive shares of our common stock on the distribution date elected by the
participant, and are paid in common stock on the distribution date elected by
the participant. No participant may elect a date for payment of deferred amounts
that is sooner than one year after the date this offering is completed.

PERFORMANCE-BASED ANNUAL INCENTIVE PLAN

Our board of directors adopted the Performance-Based Annual Incentive Plan,
referred to as the Annual Plan, in , 2000, and we intend to obtain the
approval of the Annual Plan from our sole stockholder, Sara Lee, prior to the
completion of this offering. The Annual Plan is intended to provide certain key
executives with annual incentive compensation that is tied to the achievement of
pre-established and objective performance goals. The compensation and employee
benefits committee of our board administers the Annual Plan. In the case of
awards intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the committee will consist solely of two
or more "outside directors" within the meaning of Section 162(m) of the Code.
Under the Annual Plan, each participant is eligible to receive a predetermined
annual award established by the compensation and employee benefits committee,
which award may not exceed $1.0 million, if the performance goal has been
satisfied.

2000 NON-EMPLOYEE DIRECTOR STOCK PLAN

Our board of directors adopted the 2000 Non-Employee Director Stock Plan,
referred to as the Director Plan, on , 2000, and we intend to obtain the
approval of the Director Plan from our sole stockholder, Sara Lee, prior to the
completion of this offering.

ADMINISTRATION. The compensation and employee benefits committee of our
board of directors will administer the Director Plan. Until Sara Lee effects an
exchange or other distribution of the Coach common stock it owns, we have agreed
to adopt procedures satisfactory to Sara Lee to ensure that the issuance of
shares of our common stock under the Director Plan will not cause

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Sara Lee's ownership of our common stock to fall below 80%, which is necessary
to preserve the tax-free status of such a transaction. Under these procedures,
we may be required to repurchase shares of our common stock on the open market
as options are exercised.

NUMBER OF SHARES AVAILABLE UNDER THE DIRECTOR PLAN. As of , 2000, the
aggregate number of shares reserved for options and share awards under the
Director Plan was , and no options to acquire shares or other awards were
issued and outstanding as of that date. In any fiscal year, the aggregate number
of shares that will be available for awards under the Director Plan will be
one-tenth of one percent (.1%) of the outstanding shares of common stock as of
the last day of the immediately preceding fiscal year. The number of shares of
common stock available under the Director Plan will be proportionately adjusted
in the event of any stock dividend, stock split, combination or exchange of
securities, merger, consolidation, recapitalization, spin-off or other
distribution (other than normal cash dividends).

ELECTION FOR DIRECTORS FEES. Non-employee directors may elect to receive
all or any portion of their annual directors fees in the form of either options
or stock or a combination of options or stock.

OPTIONS. Each non-employee director will receive an annual option retainer
consisting of 5,000 options on the last regularly scheduled meeting of the board
held in October in each year beginning in October 2000. A restoration option may
be granted if a director pays the purchase price upon exercise of an option by
surrendering shares.

All options granted under our Director Plan have a term not longer than
10 years and an exercise price equal to the fair market value of our common
stock on the date of grant. Each option becomes exercisable six months after the
option grant date; provided that no option may be exercised until the earlier of
one year following this offering and the date that Sara Lee effects an exchange
or other distribution of the Coach common stock it owns. After termination of
services as a non-employee director, an optionee may exercise the vested portion
of his or her option through the expiration of its term.

STOCK AND OPTIONS IN LIEU OF FEES. We will deliver to each non-employee
director who elects to receive stock in lieu of fees the number of shares equal
to the portion of the annual directors fees elected to be invested in shares
divided by the fair market value per share on the award date. Shares to be paid
in respect of, and prior to, the one-year period beginning on the first
November 1 after such election will not be transferred to the non-employee
director until immediately after the first annual meeting of stockholders held
after the date of such award. The amount of dividends that would otherwise be
paid on such shares will be held by Coach until immediately after that annual
meeting. Any undelivered shares and dividend equivalents will be forfeited if
the non-employee director is not elected a director of Coach at that annual
meeting. We will deliver to each non-employee director who elects to receive
options in lieu of fee the number of shares equal to (a) three times the portion
of the annual directors fees elected to be paid in the form of an option,
divided by (b) the fair market value per share on the option grant date.

TRANSFERABILITY OF OPTIONS. A non-employee director generally may not
transfer options granted to him or her under our Director Plan other than by
will or the laws of descent and distribution. Only an optionee may exercise his
or her options during his or her lifetime.

ADJUSTMENTS IN CONNECTION WITH A CHANGE IN CONTROL. In contemplation of or
in the event of a change in control, the administrator may provide for
appropriate adjustments (including acceleration of vesting and settlements of or
substitutions for awards either at the time an award is granted or at a
subsequent date). In the event of a change in control, all outstanding options
shall be immediately vested and exercisable and all shares and dividend
equivalents not yet transferred to

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the non-employee director will be immediately transferred to the non-employee
director. Any exchange or distribution of our common stock by Sara Lee should
not constitute a change in control.

AMENDMENT AND TERMINATION OF THE DIRECTOR PLAN. Our board of directors has
the authority to amend or terminate the Director Plan at any time, provided it
does not adversely affect any award previously granted under our Director Plan
without the affected non-employee director's consent.

DIRECTORS' DEFERRED COMPENSATION PLAN

Our board of directors adopted the Directors' Deferred Compensation Plan in
, 2000, and we intend to obtain the approval of the Director's Deferred
Compensation Plan from our sole stockholder, Sara Lee, prior to the completion
of this offering. This plan is not a tax-qualified retirement plan. The
Directors' Deferred Compensation Plan is a plan that permits non-employee
directors to elect to defer all or a portion of their annual directors fees that
are otherwise payable in cash. Amounts deferred under the Directors' Deferred
Compensation Plan are invested in a stock account. All investments in the stock
account are invested in common stock equivalents, which represent the right to
receive the company's common stock on the distribution date elected by the
participant, and are paid in common stock on the distribution date elected by
the participant. No participant may elect a date for payment of deferred amounts
that is sooner than one year after the date this offering is completed.

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ARRANGEMENTS BETWEEN SARA LEE AND COACH

THE FOLLOWING DESCRIPTION OF THE MASTER SEPARATION AGREEMENT AND KEY RELATED
AGREEMENTS IS ONLY A SUMMARY. FOR COMPLETE INFORMATION, YOU SHOULD READ THE FULL
TEXT OF THESE AGREEMENTS, WHICH HAVE BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AS EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS
A PART.

MASTER SEPARATION AGREEMENT

The master separation agreement contains the key provisions relating to our
separation from Sara Lee, this offering and Sara Lee's plans to complete its
divestiture of Coach within 18 months of this offering through an exchange or
other distribution of all or a significant portion of its shares of our common
stock.

THE SEPARATION. The separation will occur before the completion of this
offering. Under the separation agreement, Sara Lee will transfer assets and
liabilities to us related to our business, including our allocable portion of
Sara Lee indebtedness in the form of a note payable to a Sara Lee subsidiary.
The transfer will occur on the separation date. In addition to the separation
agreement, there are a number of ancillary agreements which detail the
separation and various interim and ongoing relationships between Sara Lee and
Coach following the separation. These include:

- a general assignment and assumption agreement;

- an employee matters agreement;

- a tax sharing agreement;

- a master transitional services agreement;

- a real estate matters agreement; and

- an indemnification and insurance matters agreement.

To the extent that the terms of any of these ancillary agreements conflict with
the separation agreement, the terms of these agreements will govern. The
material terms of these agreements are described more fully below.

THE INITIAL PUBLIC OFFERING. The parties are obligated to use their
reasonable efforts to satisfy the following conditions to the consummation of
this offering, any of which may be waived by Sara Lee:

- the registration statement containing this prospectus must be effective
and no stop-order shall be in effect with respect to the registration
statement;

- state securities and blue sky laws must be satisfied;

- our common stock must be listed on the New York Stock Exchange;

- all our obligations under the underwriting agreement must be met or waived
by the underwriters;

- Sara Lee must own at least 80.1% of our outstanding common stock following
this offering;

- no legal restraints may exist preventing the separation, this offering or
any other transaction contemplated by the separation agreement;

- the separation must have occurred; and

- the separation agreement must not have been terminated.

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THE EXCHANGE OR OTHER DISTRIBUTION. Sara Lee currently is planning to
effect an exchange or other distribution of all or a significant portion of its
shares of our common stock within 18 months of this offering, although the
timing of the exchange or other distribution has not been finally determined.
Sara Lee is not obligated to complete any exchange or other distribution, and we
cannot assure you as to whether, when or how it will occur. Sara Lee, in its
sole and absolute discretion, will determine the date of any exchange or other
distribution and the timing, terms and conditions of the exchange or other
distribution. We agree to take all action reasonably requested by Sara Lee to
facilitate the exchange or other distribution.

COVENANTS BETWEEN SARA LEE AND COACH. We have agreed with Sara Lee to
exchange information, engage in auditing practices, not take any action that
would jeopardize Sara Lee's ownership of over 80% of our outstanding stock at
any time prior to Sara Lee's exchange or other distribution of our common stock
and resolve disputes in a particular manner. We have also agreed to maintain the
confidentiality of certain information, preserve available legal privileges and
engage in certain routine environmental and safety practices consistent with
laws and in accordance with Sara Lee's environmental management system.

INFORMATION EXCHANGE. Both parties have agreed to share information
relating to governmental, accounting, contractual and other similar
requirements of our ongoing businesses, unless the sharing could be
commercially detrimental, violate any law or agreement or waive any
attorney-client privilege. In furtherance of this covenant, both parties
have agreed as follows:

- Each party has agreed to maintain adequate internal accounting systems
and controls to allow the other party to satisfy its own reporting
obligations and prepare its own financial statements.

- Each party will retain records beneficial to the other party for a
specified period of time. If the records are going to be destroyed, the
destroying party will give the other party an opportunity to retrieve
all relevant information from the records, unless the records are
destroyed in accordance with adopted record retention policies.

- Each party will use commercially reasonable efforts to provide the
other party with directors, officers, employees, other personnel and
agents who may be used as witnesses in and books, records and other
documents which may reasonably be required in connection with legal,
administrative or other proceedings.

AUDITING PRACTICES. So long as Sara Lee is required to consolidate our
results of operations and financial position, we have agreed to:

- not select a different independent accounting firm from that used by
Sara Lee without Sara Lee's consent;

- use commercially reasonable efforts to enable our auditors to date
their opinion on our audited annual financial statements on or before
the same date as Sara Lee's auditors date their opinion on Sara Lee's
financial statements;

- not change our fiscal year;

- exchange all relevant information needed to prepare financial
statements;

- grant each other's internal auditors access to each other's records and
to members of management; and

- notify each other of any change in accounting principles.

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SARA LEE'S OWNERSHIP OF OVER 80% OF OUR COMMON STOCK. We have agreed
with Sara Lee that, from the separation date until the date of any exchange
or other distribution of all or a significant portion of our common stock by
Sara Lee, we will not take any action, such as issuing stock, that would
cause Sara Lee to no longer own over 80% of our outstanding stock. We may,
however, issue stock options and restricted stock awards, provided we give
prior written notice to Sara Lee and obtain Sara Lee's prior consent, and
provided we repurchase sufficient amounts of our stock in open market
transactions before such options are exercisable or such restricted stock is
awarded so that Sara Lee will continue to own over 80% of our outstanding
stock.

DISPUTE RESOLUTION. If a dispute arises with Sara Lee, we have agreed
to the following procedures:

- the senior executives of Coach and Sara Lee will first make a good
faith effort to resolve the dispute through negotiation; and

- if negotiations fail, the parties will attempt to resolve the dispute
through mediation.

- If mediation fails, the parties can resort to final and binding
arbitration. By agreeing to arbitration, the parties do not intend to
deprive any court of its jurisdiction to award a pre-arbitral injunction,
pre-arbitral attachment or other order in aid of arbitration proceedings
and the enforcement of any award.

NO REPRESENTATIONS AND WARRANTIES. Sara Lee is not making any promises to
us regarding:

- the value of any asset that Sara Lee is transferring;

- whether there is a lien or encumbrance on any asset Sara Lee is
transferring;

- the absence of defenses with respect to any claims to be transferred; or

- the legal sufficiency of any conveyance of title to any asset Sara Lee is
transferring.

NO SOLICITATION. Each party has agreed not to directly solicit or recruit
employees of the other party without the other party's consent for two years
after the separation date. However, this prohibition does not apply to general
recruitment efforts carried out through public or general solicitation or where
the solicitation is employee-initiated.

SARA LEE'S REGISTRATION RIGHTS. We have agreed to use our best efforts to
effect up to three demand registrations under the applicable federal and state
securities laws of the shares of our common stock held by Sara Lee, if requested
by Sara Lee. Sara Lee may request no more than one demand registration in any
calendar year. We have also granted Sara Lee the right to include its shares of
our common stock in other registrations of our common equity securities
initiated by us or on behalf of our other stockholders. We agree to pay all
costs and expenses in connection with each registration of our common stock
requested by Sara Lee or in which Sara Lee participates. Each party has agreed
to indemnify each other and any underwriters on standard terms, including for
liability under federal securities laws.

EXPENSES. We will bear the costs and expenses associated with this offering
and Sara Lee will bear the costs and expenses associated with any exchange or
other distribution of our common stock by Sara Lee. We will bear any costs and
expenses associated with any audit of our financial statements required by any
exchange or other distribution. We will each bear our own internal costs
incurred in consummating all of these transactions.

TERMINATION OF THE AGREEMENT. Sara Lee in its sole discretion can terminate
the separation agreement and all ancillary agreements and abandon this offering
at any time prior to the closing of this offering. Both parties must agree to
terminate the separation agreement and all ancillary

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agreements at any time between the closing of this offering and any exchange or
other distribution of all or a significant portion of our common stock.

GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT

The general assignment and assumption agreement identifies the assets Sara
Lee will transfer to us and the liabilities we will assume from Sara Lee in the
separation. The agreement also describes when and how these transfers and
assumptions will occur.

ASSET TRANSFER. Effective on the separation date, Sara Lee will transfer to
us inventory and other assets related to our business, to the extent that the
inventory and assets were, prior to the separation date, Sara Lee assets.

ASSUMPTION OF LIABILITIES. Effective on the separation date, we will assume
from Sara Lee liabilities, to the extent that these liabilities were, prior to
the separation date, liabilities of Sara Lee related to our business and except
as provided in other ancillary agreements. The liabilities that we assume will
also include our allocable portion of indebtedness of Sara Lee in the form of a
note payable to a Sara Lee subsidiary.

EXCLUDED LIABILITIES. The general assignment and assumption agreement also
provides that we will not assume specified liabilities, including any
liabilities that would otherwise be allocated to us but which are covered by
Sara Lee's insurance policies, unless we are a named insured under such
policies.

DELAYED TRANSFERS. If it is not practicable to transfer specified assets
and liabilities, such as the outstanding capital stock of our subsidiaries, on
the separation date, the agreement provides that these assets and/or liabilities
will be transferred after the separation date.

TERMS OF OTHER ANCILLARY AGREEMENTS GOVERN. If another ancillary agreement
expressly provides for the transfer of an asset or an assumption of a liability,
the terms of the other ancillary agreement will determine the manner of the
transfer and assumption.

OBTAINING APPROVALS AND CONSENTS. The parties agree to use all commercially
reasonable efforts to obtain any required consents, substitutions or amendments
required to novate or assign all rights and obligations under any contracts that
will be transferred in the separation.

NONRECURRING COSTS AND EXPENSES. Any nonrecurring costs and expenses that
are not allocated in the separation agreement or any other ancillary agreement
shall be the responsibility of the party that incurs the costs and expenses.

EMPLOYEE MATTERS AGREEMENT

The employee matters agreement allocates to us certain assets, liabilities
and responsibilities relating to our current and former employees. The agreement
also provides for our employees' continued participation in some of the benefit
plans that Sara Lee currently sponsors. Pursuant to this agreement, we have
assumed and agreed to pay, perform and fulfill all obligations relating to our
employees arising out of their present or future employment with us and their
prior employment with Sara Lee relating to our business.

All of our employees will continue to participate in the Sara Lee sponsored
benefit plans, such as the pension and retirement plan, health benefit program
and group insurance plan, on terms comparable to those for Sara Lee employees
until the earlier of an exchange or other distribution by Sara Lee of our common
stock or until we establish our own benefit plans for our employees. We intend
to establish our own benefit programs no later than the time of any exchange or
other distribution by Sara Lee.

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Once we establish our own benefits plans, we may modify or terminate each
plan in accordance with the terms of that plan and our policies. None of our
benefit plans will provide benefits that overlap benefits provided by the
corresponding Sara Lee benefit plan, if any. Each of our benefit plans will
provide that all service, compensation and other benefit determinations that
were recognized under the corresponding Sara Lee benefit plan will be taken into
account under that Coach benefit plan.

Assets relating to the employee liabilities that we assume will be
transferred to us or our related plans and trusts from trusts and other funding
vehicles associated with Sara Lee's benefit plans.

TAX SHARING AGREEMENT

The tax sharing agreement allocates responsibilities for tax matters between
Coach and Sara Lee. Until the date Sara Lee effects an exchange or other
distribution of all of our common stock that it owns, Sara Lee is responsible
for preparing and filing all consolidated, combined and unitary tax returns that
include us and our subsidiaries, as well as our separate federal or state income
tax returns. We have the right to review and comment on the tax returns that
Sara Lee files on our behalf, but Sara Lee has the exclusive right to determine
the manner in which such tax returns are prepared, including the elections,
method of accounting, positions, conventions and principles of taxation to be
used. Except with respect to separate federal and state income tax returns, we
are responsible for preparing and filing any tax returns that include only us
and our subsidiaries.

The tax sharing agreement requires us to pay Sara Lee the incremental tax
costs of our inclusion in consolidated, combined and unitary tax returns. In the
case of a consolidated federal income tax return, the amount we owe Sara Lee
will be computed as if we had filed our own separate, consolidated federal
income tax return for us and our subsidiaries. The tax sharing agreement
requires Sara Lee to compensate us for some, but not all, of the tax benefits
that Sara Lee may derive from our inclusion in its consolidated federal income
tax return. In the case of a unitary, combined or consolidated state income tax
return, the amount we owe Sara Lee generally will be determined by comparing the
amount of the group tax liability including us on the return with the amount of
the group tax liability excluding us from the return. The tax sharing agreement
also provides that any refunds or deficiencies resulting from a redetermination
of our tax liability for periods during which we joined in filing consolidated,
combined or unitary tax returns are for Sara Lee's account. We are responsible
for any taxes with respect to tax returns that include only us and our
subsidiaries.

Each member of an affiliated group that files a consolidated tax return for
United States federal income tax purposes is severally liable for the affiliated
group's federal income tax liability. Accordingly, we could be required to pay a
deficiency in the group's federal income tax liability for a period during which
we were a member of Sara Lee's group even if the tax sharing agreement allocates
that liability to Sara Lee or another member of the group. However, the tax
sharing agreement provides that Sara Lee will indemnify us if we are required to
pay a deficiency in the group's federal income tax liability that is allocated
to Sara Lee or another member of the group.

Sara Lee is solely responsible for controlling and contesting any audit or
other tax proceeding with respect to any consolidated, combined or unitary tax
return that includes us and our subsidiaries, as well as any separate federal or
state income tax return relating to us and our subsidiaries. While we have the
right to be consulted and kept informed with respect to any audit or other tax
proceeding regarding a tax item for which we are responsible, Sara Lee has the
sole and exclusive right to contest or settle the item in its discretion.

The tax sharing agreement also requires us to indemnify Sara Lee for certain
taxes and similar obligations, including any taxes resulting from the failure of
any exchange or distribution by Sara Lee of our common stock (and certain
related transactions) to qualify as tax-free to Sara Lee as a

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result of actions taken, or the failure to take required actions, by us or any
of our subsidiaries. Specifically, the tax sharing agreement requires us to
cooperate with Sara Lee, and to take any and all actions reasonably requested by
Sara Lee, in connection with Sara Lee's request, if any is made, for a private
letter ruling from the Internal Revenue Service or for a legal opinion regarding
the tax-free nature of an exchange or distribution of Coach stock by Sara Lee to
Sara Lee's stockholders. Furthermore, we must comply with the representations
made in connection with any such private letter ruling or legal opinion that is
issued to Sara Lee. Our indemnity obligations include any interest and penalties
on taxes, duties or fees for which we must indemnify Sara Lee.

The tax sharing agreement further requires us and Sara Lee to cooperate with
respect to tax matters, the exchange of information and the retention of records
which may affect the income tax liability of us or Sara Lee. Disputes arising
between us and Sara Lee relating to matters covered by the tax sharing agreement
are subject to resolution through specific dispute resolution provisions in the
agreement.

MASTER TRANSITIONAL SERVICES AGREEMENT

The master transitional services agreement governs the provision of
transitional services by Sara Lee to us, on an interim basis, until two years
after the separation date, provided that the agreement automatically terminates
when Sara Lee effects an exchange or other distribution of our common stock. The
services include support services for functions including accounting, treasury,
internal audit coordination, environmental, tax, legal, Sara Lee Direct Call
Center services, risk management and assessment services, investor relations,
and other administrative functions.

Under the agreement we will pay Sara Lee a fee of $1,000,000 per year,
payable in monthly installments over the two year term of the agreement, for
these services, other than Sara Lee Direct Call Center services for which we
will pay a specified rate per minute of use and other than specifically excluded
services. The fee will be pro rated for the actual term of the agreement if the
agreement terminates in its entirety before the end of its two year term. We may
terminate the agreement with respect to any service at any time upon notice to
Sara Lee, however, the termination of any service will have no effect upon the
fee. The master transitional services agreement also gives us the ability to
request Sara Lee to provide additional services to us, but only at Sara Lee's
discretion and only upon our payment of an additional agreed upon fee. We may
also extend the term of the agreement with Sara Lee's consent on mutually
acceptable terms.

REAL ESTATE MATTERS AGREEMENT

The real estate matters agreement addresses matters relating to leased
properties used in our business that Sara Lee leases on our behalf. Under the
agreement, Sara Lee will assign to us, as soon as practicable, all leases for
store sites and other facilities used by us. The real estate matters agreement
also requires both parties to use commercially reasonable efforts to obtain any
landlord consents required for the proposed transfers of leased properties and
provides that we will pay all reasonable costs and expenses in obtaining the
landlord consents.

The agreement further provides that we will be required to accept the
transfer of all properties allocated to us, even if a site has been damaged by a
casualty. If a lease is terminated due to casualty or action by the landlord
prior to the separation date, that lease will not be transferred to us and
neither party will have any liability related thereto.

Under the agreement, we are also obligated to use commercially reasonable
efforts to obtain the release of any and all obligations of Sara Lee, including
any guarantee, surety or other security, with respect to all of the leased
properties transferred to us. We agree to indemnify Sara Lee for any and all
losses incurred by Sara Lee as a result of our occupancy of any leased property
after the separation date. In the event we execute any new leases after the
separation date, other than

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certain scheduled properties, or any of the leases transferred to us after that
date are subject to renewal after the separation date, Sara Lee will have no
obligation to provide any guarantee, surety or other security for such new or
renewed leases. If Sara Lee has not been released from all obligations with
respect to the leased properties transferred to us by the date of any exchange
or other distribution of our common stock by Sara Lee and if we fail to comply
with specified covenants and financial ratios, we may become obligated to pay
Sara Lee a fee approximately equal to one-tenth of the annual lease payments for
any such leased properties.

INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT

GENERAL RELEASE OF PRE-SEPARATION CLAIMS. Effective as of the separation
date, the indemnification and insurance matters agreement provides that we will
release Sara Lee and its affiliates, agents, successors and assigns, and Sara
Lee will release us, and our affiliates, agents, successors and assigns, from
any liabilities arising from events occurring on or before the separation date.
This provision will not impair a party from enforcing the separation agreement,
any ancillary agreement or any arrangement specified in any of these agreements.

INDEMNIFICATION. The indemnification and insurance matters agreement also
contains provisions governing indemnification. In general, we have agreed to
indemnify Sara Lee and its affiliates, agents, successors and assigns from all
liabilities arising from:

- our business, any of our liabilities or any of our contracts; and

- any breach by us of the separation agreement or any ancillary agreement.

Sara Lee has agreed to indemnify us and our affiliates, agents, successors and
assigns from all liabilities arising from:

- Sara Lee's business other than our business; and

- any breach by Sara Lee of the separation agreement or any ancillary
agreement.

These indemnification provisions do not apply to amounts collected from
insurance. The agreement also contains provisions governing notice and
indemnification procedures.

LIABILITY ARISING FROM THIS PROSPECTUS. We have agreed to indemnify Sara
Lee for any liability arising from any untrue statement of a material fact or
any omission of a material fact in this prospectus, other than any liability
relating to statements or omissions relating exclusively to Sara Lee.

ENVIRONMENTAL MATTERS. Sara Lee has agreed to indemnify us and our
affiliates, agents, successors and assigns from (1) all liabilities arising from
environmental conditions existing prior to the separation date at facilities
transferred to us, or which arise out of our operations occurring before the
separation date at these facilities or former facilities and (2) all third party
site liabilities arising from pre-separation activities.

We have agreed to indemnify Sara Lee and its affiliates, agents, successors
and assigns from (1) all liabilities arising from environmental conditions
caused by our operations on and after the separation date at any of the
facilities transferred to us, (2) from environmental conditions at our
facilities arising from an event that occurs on or after the separation date and
(3) all third party site liabilities arising from post-separation activities.

INSURANCE MATTERS. The agreement also contains provisions governing our
insurance coverage from the separation date until the date of any exchange or
other distribution of our common stock by Sara Lee. In general, we agree to
reimburse Sara Lee for premium expenses related to insurance coverage during
this period. Prior to any exchange or other distribution, Sara

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Lee will maintain insurance policies on our behalf. Sara Lee will promptly
distribute to Coach any insurance proceeds that Sara Lee recovers under any Sara
Lee insurance policy relating to our business. We will work with Sara Lee to
secure additional insurance if desired by both parties. Sara Lee also will
maintain insurance for Coach prior to the separation date.

ASSIGNMENT. The indemnification and insurance matters agreement is not
assignable by either party without the prior written consent of the other party.

INTERCOMPANY NOTE

Upon our separation from Sara Lee, we will assume an intercompany note
payable to a subsidiary of Sara Lee in the aggregate principal amount of
$190 million. The note represents our allocable portion of indebtedness of Sara
Lee. The note will bear interest at a rate based on one month LIBOR plus
30 basis points, for as long as Sara Lee owns a majority of our outstanding
stock, and one month LIBOR plus 250 basis points thereafter. The note will have
a final maturity of June 30, 2002 and may be prepaid at any time without penalty
or premium. The note also requires mandatory prepayments from excess cash flow,
as defined in the note, remaining after repayment of borrowings under the
revolving credit facility. The note includes various covenants, including
restrictions on secured debt, sale leaseback transactions and leases and
maintenance of an interest coverage ratio, and customary events of default,
including failure to pay interest when due, covenant defaults and certain events
of our bankruptcy. The note also requires us to obtain the consent of the Sara
Lee subsidiary prior to entering into certain extraordinary transactions.

As required by the terms of the note, we will use all of the net proceeds of
the offering to repay a portion of the amount outstanding under the note.
Immediately following the offering, the aggregate principal amount owed by us to
the Sara Lee subsidiary under the note will be approximately $ million, based
upon an assumed initial public offering price of $ .

REVOLVING CREDIT FACILITY

Prior to the completion of this offering, we will enter into a revolving
credit facility with Sara Lee which will provide borrowing and investment
capabilities under which we may borrow up to $75 million from Sara Lee and
invest excess funds with them. Indebtedness under the revolving credit facility
will bear interest based upon one month LIBOR plus 30 basis points on the entire
facility. Investment will earn interest based upon one month LIBOR less 20 basis
points. The revolving credit facility is available to fund general corporate
purposes and terminates when Sara Lee no longer holds a majority of our
outstanding common stock. We intend to replace the Sara Lee facility with a
banking institution facility at such time as the Sara Lee facility terminates.
The credit facility may be prepaid without penalty or premium. The facility
includes essentially the same covenants and customary events of default as the
intercompany note, including failure to pay interest when due, covenant defaults
and certain events of our bankruptcy.

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PRINCIPAL STOCKHOLDER

Prior to this offering, all of the outstanding shares of our common stock
will be owned by Sara Lee, a publicly-held company that is listed on the New
York Stock Exchange. After this offering, Sara Lee will own about %, or about
% if the underwriters fully exercise their option to purchase additional
shares of our outstanding common stock. Except for Sara Lee, we are not aware of
any person or group that will beneficially own more than 5% of the outstanding
shares of our common stock following this offering. None of our executive
officers or directors currently owns any shares of our common stock, but those
who own shares of Sara Lee common stock will be treated on the same terms as
other holders of Sara Lee stock in any exchange or other distribution of our
common stock by Sara Lee. See "Management--Stock Ownership of Directors and
Executive Officers" for a description of the ownership of Sara Lee stock by our
directors and executive officers.

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DESCRIPTION OF CAPITAL STOCK

THE FOLLOWING DESCRIPTION OF THE TERMS OF OUR CAPITAL STOCK IS ONLY A
SUMMARY. FOR A COMPLETE DESCRIPTION, WE REFER YOU TO THE MARYLAND GENERAL
CORPORATE LAW, OUR CHARTER AND BYLAWS. WE HAVE FILED OUR CHARTER AND BYLAWS AS
EXHIBITS TO THIS REGISTRATION STATEMENT.

GENERAL

Our charter provides that we may issue up to 100,000,000 shares of common
stock, par value $.01 per share, and up to 25,000,000 shares of preferred stock,
par value $.01 per share, and permits our board, without stockholder approval,
to amend the charter to increase or decrease the aggregate number of shares of
stock or the number of shares of stock of any class or series that we have
authority to issue. Upon completion of this offering, shares of common
stock, or shares of common stock if the underwriters fully exercise their
option to purchase additional shares, and no shares of preferred stock will be
issued and outstanding. Under Maryland law, our stockholders generally are not
liable for our debts or obligations.

COMMON STOCK

All shares of common stock offered by this prospectus will be duly
authorized, fully paid and nonassessable. Holders of our common stock have no
preference, conversion, exchange, sinking fund, redemption or appraisal rights
and have no preemptive rights to subscribe for any of our securities. Holders of
our common stock are entitled to receive dividends when authorized by our board
of directors out of assets legally available for the payment of dividends. They
are also entitled to share ratably in our assets legally available for
distribution to our stockholders in the event of our liquidation, dissolution or
winding up, after payment of or adequate provision for all of our known debts
and liabilities. These rights are subject to the preferential rights of any
other class or series of our stock.

Each outstanding share of common stock entitles the holder to one vote on
all matters submitted to a vote of stockholders, including the election of
directors. Except as provided with respect to any other class or series of
stock, the holders of our common stock will possess the exclusive voting power.
There is no cumulative voting in the election of directors, which means that the
holders of a majority of the outstanding shares of common stock can elect all of
the directors then standing for election, and the holders of the remaining
shares will not be able to elect any directors.

Under Maryland law, a Maryland corporation generally cannot dissolve, amend
its charter, merge, sell all or substantially all of its assets, engage in a
share exchange or engage in similar transactions outside the ordinary course of
business, unless approved by the affirmative vote of stockholders holding at
least two-thirds of the shares entitled to vote on the matter. However, a
Maryland corporation may provide in its charter for approval of these matters by
a lesser percentage, but not less than a majority of all the votes entitled to
be cast on the matter. Our charter provides for approval by a majority of all
the votes entitled to be cast in these situations.

POWER TO RECLASSIFY SHARES OF OUR STOCK

Our charter authorizes our board of directors to classify and reclassify any
unissued shares of our common stock and preferred stock into other classes or
series of stock and permits our board, without stockholder approval, to amend
the charter to increase or decrease the aggregate number of shares of stock or
the number of shares of stock of any class or series that we have authority to
issue. Prior to issuance of shares of each class or series, the board is
required by Maryland law and by our charter to set the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications and terms or conditions of

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redemption for each class or series. Thus, the board could authorize the
issuance of shares of preferred stock with terms and conditions that could have
the effect of delaying, deferring or preventing a transaction or a change in
control that might involve a premium price for holders of our common stock or
otherwise be in their best interest. No shares of our preferred stock are
presently outstanding and we have no present plans to issue any preferred stock.

POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK

We believe that the power to issue additional shares of common stock or
preferred stock and to classify or reclassify unissued shares of common or
preferred stock and thereafter to issue the classified or reclassified shares
provides us with increased flexibility in structuring possible future financings
and acquisitions and in meeting other needs which might arise. These actions can
be taken without stockholder approval, unless stockholder approval is required
by applicable law or the rules of any stock exchange or automated quotation
system on which our securities may be listed or traded. Although we have no
present intention of doing so, we could issue a class or series of stock that
could have the effect of delaying, deferring or preventing a transaction or a
change in control that might involve a premium price for holders of common stock
or otherwise be in their best interest.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is .

CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS

BOARD OF DIRECTORS

Our charter and bylaws provide that the number of our directors may be
established by the board of directors. Our charter provides that any vacancy
will be filled, at any regular meeting or at any special meeting called for that
purpose, by a majority of the remaining directors; PROVIDED, HOWEVER, that while
Sara Lee, its affiliates or certain of its transferees own a majority of our
voting stock, any vacancy on our board of directors which results from the
removal of a director may be filled only by the affirmative vote of a majority
of our voting stock and any vacancy which results from any reason other than
removal shall be filled only by the affirmative vote of a majority of the
remaining directors and only with a director having the qualification of having
been nominated, and whose election has been consented to, by Sara Lee or, if
such vacancy remains unfilled at the time of the next meeting of the
stockholders, by the affirmative vote of the holder or holders of a majority of
our voting stock.

Our board is not currently classified and, although it would otherwise be
permissible under Maryland law for our board to become classified without
stockholder approval, we have included a provision in our charter prohibiting
the classifying of our board without the approval of a majority of the votes
cast on such matter by holders of our common stock.

REMOVAL OF DIRECTORS

Our charter provides that a director may be removed with or without cause by
the affirmative vote of a majority of the votes entitled to be cast in the
election of directors.

BUSINESS COMBINATIONS

Under Maryland law, "business combinations" between a Maryland corporation
and an interested stockholder or an affiliate of an interested stockholder are
prohibited for five years after the most recent date on which the interested
stockholder becomes an interested stockholder. These

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business combinations include certain mergers, asset transfers or issuances or
reclassifications of equity securities. An interested stockholder is defined as:

- any person who beneficially owns ten percent or more of the voting power
of the corporation's shares; or

- an affiliate or associate of the corporation who, at any time within the
two-year period prior to the date in question, was the beneficial owner of
10% or more of the voting power of the then outstanding voting stock of
the corporation.

A person is not an interested stockholder under the statute if the board of
directors approved in advance the transaction by which the stockholder otherwise
would have become an interested stockholder.

After the five-year prohibition, any business combination between the
Maryland corporation and an interested stockholder generally must be recommended
by the board of directors of the corporation and approved by the affirmative
vote of at least:

- 80% of the votes entitled to be cast by holders of outstanding shares of
voting stock of the corporation; and

- two-thirds of the votes entitled to be cast by the holders of voting stock
of the corporation other than shares held by the interested stockholder
with whom or with whose affiliate the business combination is to be
effected or held by an affiliate or associate of the interested
stockholder.

These super-majority vote requirements do not apply if the corporation's common
stockholders receive a minimum price, as defined under Maryland law, for their
shares in the form of cash or other consideration in the same form as previously
paid by the interested stockholder for its shares.

The statute provides for various exemptions from its provisions, including
business combinations that are exempted by the board of directors prior to the
time that the interested stockholder becomes an interested stockholder. Pursuant
to the statute, our board of directors has exempted any business combination
involving Sara Lee or its affiliates. Consequently, the five-year prohibition
and the super-majority vote requirements will not apply to business combinations
between us and any of them. As a result, Sara Lee or its affiliates may be able
to enter into business combinations with us that may not be in the best interest
of our stockholders, without compliance with the super-majority vote
requirements and the other provisions of the statute.

The business combination statute could have the effect of delaying,
deferring or preventing a transaction or a change in control that might involve
a premium price for holders of our common stock or otherwise be in their best
interest.

CONTROL SHARE ACQUISITIONS

Our bylaws contain a provision exempting from Maryland's control share
acquisition statute any and all acquisitions by any person of shares of our
stock. However, this provision could be amended or eliminated in the future.

Maryland's control share acquisition statute provides that control shares of
a Maryland corporation acquired in a control share acquisition have no voting
rights, except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter. Shares owned by the acquiror, by officers or
by directors who are employees of the corporation are excluded from shares
entitled to vote on the matter. Control shares are voting shares of stock,
which, if aggregated with all other shares of stock owned by the acquiror or in
respect of which the acquiror

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is able to exercise or direct the exercise of voting power (except solely by
virtue of a revocable proxy), would entitle the acquiror to exercise voting
power

- one-tenth or more but less than one-third;

- one-third or more but less than a majority; or

- a majority or more of all voting power.

Control shares do not include shares the acquiring person is then entitled to
vote as a result of having previously obtained stockholder approval. A control
share acquisition means the acquisition of control shares, subject to certain
exceptions.

A person who has made or proposes to make a control share acquisition may
compel the board of directors of the corporation to call a special meeting of
stockholders to be held within 50 days of demand to consider the voting rights
of the shares. The right to compel the calling of a special meeting is subject
to the satisfaction of certain conditions, including an undertaking to pay the
expenses of the meeting. If no request for a meeting is made, the corporation
may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then
the corporation may redeem for fair value any or all of the control shares,
except those for which voting rights have previously been approved. The right of
the corporation to redeem control shares is subject to certain conditions and
limitations. Fair value is determined, without regard to the absence of voting
rights for the control shares, as of the date of the last control share
acquisition by the acquiror or, if a meeting of stockholders is held, at which
the voting rights of the shares are considered and not approved, as of the date
of such meeting. If voting rights for control shares are approved at a
stockholders meeting and the acquiror becomes entitled to vote a majority of the
shares entitled to vote, all other stockholders may exercise appraisal rights.
The fair value of the shares as determined for purposes of appraisal rights may
not be less than the highest price per share paid by the acquiror in the control
share acquisition.

The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction, or (b) to acquisitions approved or exempted by the charter or
bylaws of the corporation.

AMENDMENT TO THE CHARTER

Our charter may be amended only by the affirmative vote of the holders of
not less than a majority of all of the votes entitled to be cast on the matter.

DISSOLUTION OF THE COMPANY

The dissolution of the Company must be approved by the affirmative vote of
the holders of not less than a majority of all of the votes entitled to be cast
on the matter.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS

Our bylaws provide that with respect to an annual meeting of stockholders,
nominations of persons for election to the board of directors and the proposal
of business to be considered by stockholders may be made only (1) pursuant to
our notice of the meeting, (2) by the board of directors, (3) by Sara Lee during
the period it holds a majority of our outstanding common stock or (4) by a
stockholder who is entitled to vote at the meeting and who has complied with the
advance notice procedures of the bylaws. With respect to special meetings of
stockholders, only the business specified in our notice of the meeting may be
brought before the meeting. Nominations of

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persons for election to the board of directors at a special meeting may be made
only (1) pursuant to our notice of the meeting, (2) by the board of directors,
(3) by Sara Lee during the period it holds a majority of our outstanding common
stock or (4) provided that the board of directors has determined that directors
will be elected at the meeting, by a stockholder who is entitled to vote at the
meeting and who has complied with the advance notice provisions of the bylaws.

LIMITATION OF LIABILITY AND INDEMNIFICATION

Maryland law permits us to include in our charter a provision limiting the
liability of our directors and officers to us and our stockholders for money
damages, except for liability resulting from (1) actual receipt of an improper
benefit or profit in money, property or services or (2) active and deliberate
dishonesty established by a final judgment as material to the cause of action.
Our charter contains a provision which eliminates directors' and officers'
liability to the maximum extent permitted by Maryland law.

Maryland law requires us (unless our charter provides otherwise, which our
charter does not) to indemnify a director or officer who has been successful in
the defense of any proceeding to which he is made a party by reason of his
service in that capacity. Maryland law permits us to indemnify our present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding unless it is established that:

- the act or omission was material to the matter giving rise to the
proceeding and (1) was committed in bad faith or (2) was the result of
active and deliberate dishonesty;

- the director or officer actually received an improper personal benefit in
money, property or services; or

- in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful.

However, under Maryland law, we may not indemnify for an adverse judgment in a
suit by or in our right or for a judgment on the basis that personal benefit was
improperly received, unless, in either case, a court orders indemnification and
then only for expenses.

In addition, Maryland law permits us to advance reasonable expenses to a
director or officer upon our receipt of (1) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification and (2) a written undertaking by him or on
his behalf to repay the amount paid or reimbursed by us if it is ultimately
determined that the standard of conduct was not met.

Our charter also authorizes us and our bylaws obligate us, to the maximum
extent permitted by Maryland law, to indemnify (1) any present or former
director or officer, or person who has agreed to become a director or officer,
or (2) any director or officer who, at our request, serves another corporation
or other enterprise as a director, officer, partner or trustee against any claim
or liability arising from that status and to pay or reimburse their reasonable
expenses in advance of final disposition of a proceeding. Our charter and bylaws
also permit us to indemnify and advance expenses to any person who served our
predecessor in any of the capacities described above and any employee or agent
of us or our predecessor.

ANTI-TAKEOVER EFFECT OF PARTICULAR PROVISIONS OF MARYLAND LAW AND OF THE
CHARTER AND BYLAWS

The business combination provisions and, if the applicable provision in our
bylaws is rescinded, the control share acquisition provisions of Maryland law
and the advance notice

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provisions of our bylaws could have the effect of delaying, deferring or
preventing a transaction or a change in control that might involve a premium
price for holders of common stock or otherwise be in their best interest.

CORPORATE OPPORTUNITIES

Under the terms of our charter, for so long as Sara Lee owns at least 50% of
our outstanding common stock, Sara Lee shall not have a duty to refrain from
engaging directly or indirectly in the same or similar business activities or
lines of business as us, and neither Sara Lee nor any its officers or directors
shall be liable to us or our stockholders for breach of any duty by reason of
any such activities. If Sara Lee acquires knowledge of a potential transaction
or matter that may be a corporate opportunity for Sara Lee and us, Sara Lee
shall have no duty to communicate or offer such corporate opportunity to us and
shall not be liable to us or our stockholders for breach of any duty as our
stockholder if Sara Lee pursues or acquires such corporate opportunity for
itself, directs such corporate opportunity to another person or entity, or does
not communicate information regarding, or offer, such corporate opportunity to
us.

If one of our directors, officers or employees who is also a director,
officer or employee of Sara Lee acquires knowledge of a potential transaction or
matter that may be a corporate opportunity for both us and Sara Lee, such
director, officer or employee shall be entitled to offer such corporate
opportunity to us or Sara Lee as such director, officer or employee deems
appropriate under the circumstances in his or her sole discretion, and no such
director, officer or employee shall be liable to us or our stockholders for
breach of any duty by reason of the fact that (1) such director, officer or
employee offered such corporate opportunity to Sara Lee (rather than us) or did
not communicate information regarding such corporate opportunity to us or
(2) Sara Lee pursues or acquires such corporate opportunity for itself or
directs such corporate opportunity to another person or does not communicate
information regarding such corporate opportunity to the us. Neither Sara Lee nor
any officer or director of Sara Lee shall be liable to us or our stockholders
for breach of any duty by reason of the fact that Sara Lee or an officer or
director of Sara Lee takes or fails to take any action or exercises or fails to
exercise any rights or gives or withholds any consent in connection with any
agreement or contract between Sara Lee and us.

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SHARES ELIGIBLE FOR FUTURE SALE

RULE 144

All of the shares of our common stock sold in this offering will be freely
tradable without restriction under the Securities Act, except for any shares
which be may acquired by our "affiliates," as that term is defined in Rule 144
under the Securities Act. Persons who may be deemed to be our affiliates
generally include individuals or entities that control, are controlled by, or
are under common control with Coach and may include our directors and officers
as well as our significant stockholders.

Sara Lee currently is planning to effect an exchange or other distribution
of all or a significant portion of its shares of our common stock within
18 months after this offering. Shares of our common stock distributed to Sara
Lee stockholders in the exchange or other distribution generally will be freely
transferable, except for shares of common stock received by persons who may be
deemed to be affiliates of Coach. Persons who are deemed to be our affiliates
will be permitted to sell the shares of common stock that are issued in this
offering or that they receive in the exchange or other distribution only through
registration under the Securities Act, unless an exemption from registration is
available, including an exemption pursuant to Rule 144.

The shares of our common stock held by Sara Lee before the exchange or other
distribution are deemed "restricted securities" as defined in Rule 144, and may
not be sold other than through registration under the Securities Act, unless an
exemption from registration is available, including an exemption pursuant to
Rule 144. Sara Lee, our directors and officers and we have agreed not to offer
or sell any shares of our common stock, subject to exceptions, for a period of
180 days after the date of this prospectus, without the prior written consent of
the underwriters.

STOCK PLANS

We will grant shares of our common stock pursuant to our stock plans subject
to restrictions. See the section in this prospectus entitled "Management" for
more information on our stock plans. We currently expect to file a registration
statement under the Securities Act to register shares reserved for issuance
under our stock incentive plans. Shares issued pursuant to awards after the
effective date of the registration statement, other than shares issued to
affiliates, generally will be freely tradable without further registration under
the Securities Act subject to any contractual restrictions on transfer.

REGISTRATION RIGHTS

Under the master separation agreement with Sara Lee, we have granted Sara
Lee the right to cause us to file up to three registration statements under the
Securities Act covering resales of all shares of common stock held by Sara Lee
and to cause the registration statements to become effective. Sara Lee may not
request more than one demand registration in any calendar year. We have also
granted Sara Lee the right to include its shares of our common stock in other
registrations of our common stock initiated by us or on behalf of our other
stockholders. We will pay the expenses of these registrations.

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UNDERWRITING

Coach and the underwriters for the offering named below have entered into an
underwriting agreement with respect to the shares being offered. Subject to
certain conditions, each underwriter has severally agreed to purchase the number
of shares indicated in the following table. Goldman, Sachs & Co., ,
and are the representatives of the underwriters.

<TABLE>
<CAPTION>
Underwriter Number of Shares
----------- ------------------
<S> <C>
Goldman, Sachs & Co.....................................
-------
Total.................................................
=======
</TABLE>

If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from Coach to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in approximately the same proportion as set forth
in the table above.

The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by Coach. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.

<TABLE>
<CAPTION>
Paid by the Company
-------------------
No Exercise Full Exercise
------------ -------------
<S> <C> <C>
Per Share...................................... $ $
Total.......................................... $ $
</TABLE>

Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
selected other brokers or dealers at a discount of up to $ per share
from the initial public offering price. If all the shares are not sold at the
initial offering price, the representatives may change the offering price and
the other selling terms.

Coach, Sara Lee and Coach's directors and officers have agreed with the
underwriters not to dispose of or hedge any of their common stock or securities
convertible into or exchangeable for shares of Coach's common stock during the
period from the date of this prospectus continuing through the date 180 days
after the date of this prospectus, except with the prior written consent of the
representatives. This agreement does not apply to any grants under existing
employee benefit plans. See "Shares Eligible For Future Sale" for a discussion
of transfer restrictions.

Prior to the offering, there has been no public market for the shares. The
initial public offering price will be negotiated among Coach and the
representatives of the underwriters. Among the factors to be considered in
determining the initial public offering price of the shares, in addition to

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prevailing market conditions, will be Coach's historical performance, estimates
of the business potential and earnings prospects, an assessment of Coach's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.

Coach intends to list the common stock on the New York Stock Exchange under
the symbol "COH". In order to meet one of the requirements for listing the
common stock on the NYSE, the underwriters have undertaken to sell lots of 100
or more shares to a minimum of 2,000 beneficial holders.

In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while the offering
is in progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the New York
Stock Exchange, in the over-the-counter market or otherwise.

The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.

At the request of Coach, the underwriters have reserved for sale, at the
initial public offering price, approximately % of the shares of common stock
being offered for its directors and select employees, including directors and
executive officers of Sara Lee. There can be no assurance that any of the
reserved shares will be so purchased. The number of shares available for sale to
the general public in the offering will be reduced by the number of reserved
shares sold. Any reserved shares not so purchased will be offered to the general
public on the same basis as the other shares offered hereby.

A prospectus in electronic format may be made available on the websites
maintained by the lead manager of this offering and may also be made available
on web sites maintained by other underwriters. The underwriters may agree to
allocate a number of shares to underwriters for sale to their online brokerage
account holders. Internet distributions will be allocated by the lead managers
to underwriters that may make Internet distributions on the same basis as other
allocations.

Coach estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately $ .

Coach and Sara Lee have agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.

Goldman, Sachs & Co. has from time to time performed various investment
banking services for Sara Lee in the past, and it may from time to time in the
future perform investment banking services for Sara Lee and Coach for which it
has received and will receive customary fees.

72
<PAGE>
LEGAL MATTERS

The validity of the issuance of the shares of common stock offered hereby
will be passed upon for us by Ballard Spahr Andrews & Ingersoll, LLP. Certain
legal matters will be passed upon for the underwriters by Kirkland & Ellis,
Chicago, Illinois. Kirkland & Ellis represents Sara Lee from time to time in
connection with various legal matters.

EXPERTS

The financial statements included in this prospectus have been audited by
Arthur Andersen LLP, independent auditors, as stated in their reports appearing
herein, and are included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1, including exhibits and schedules, under the Securities
Act with respect to the common stock offered by this prospectus. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement. Some
items included in the registration statement are omitted from this prospectus in
accordance with the rules and regulations of the SEC. For further information
about us and our common stock, reference is made to the registration statement
and the exhibits and any schedules to the registration statement. Statements
contained in this prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance, if the
contract or document is filed as an exhibit, reference is made to the copy of
the contract or other documents filed as an exhibit to the registration
statement, each statement being qualified in all respects by such reference. A
copy of the registration statement, including the exhibits and schedules to the
registration statement, may be read and copied at the SEC's Public Reference
Room at Room 1024, 450 Fifth Street, N.W., Washington, DC 20549 and inspected at
the regional offices of the SEC located at 7 World Trade Center, Suite 1300, New
York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661. For further information on the Public Reference Rooms, please
call the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site
at http://www.sec.gov, from which interested persons can electronically access
the registration statement, including the exhibits and any schedules to the
registration statement.

As a result of this offering, we will become subject to the full
informational requirements of the Securities Exchange Act of 1934. We will
fulfill our obligations with respect to those requirements by filing periodic
reports and other information with the SEC. We intend to furnish our
stockholders with annual reports containing financial statements certified by an
independent public accounting firm.

73
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Audited Historical and Unaudited Interim Consolidated and
Combined Financial Statements:
Report of Independent Public Accountants.................. F-2
Consolidated and Combined Balance Sheets.................. F-3
Consolidated and Combined Statements of Income............ F-4
Consolidated and Combined Statement of Equity............. F-5
Consolidated and Combined Statements of Cash Flows........ F-6
Notes to Consolidated and Combined Historical Financial
Statements.............................................. F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of Sara Lee Corporation:

We have audited the accompanying consolidated and combined balance sheets of
Coach (a business comprised of divisions and subsidiaries of Sara Lee
Corporation) as of July 3, 1999 and June 27, 1998, and the related consolidated
and combined statements of income, equity and cash flows for the years ended
July 3, 1999, June 27, 1998 and June 28, 1997. These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated and combined financial position of
Coach as of July 3, 1999 and June 27, 1998, and the results of its operations
and its cash flows for the years ended July 3, 1999, June 27, 1998 and
June 28, 1997 in conformity with accounting principles generally accepted in the
United States.

Our audit was made for the purpose of forming an opinion on the basic
consolidated and combined financial statements taken as a whole. The schedule
identified in Item 16(B) of the registration statement is presented for purposes
of complying with the Securities and Exchange Commission rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.

Arthur Andersen LLP

Chicago, Illinois
June 1, 2000

F-2
<PAGE>
COACH, INC.
CONSOLIDATED AND COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
PRO FORMA
MARCH 27, APRIL 1, APRIL 1,
JUNE 27, JULY 3, 1999 2000 2000
1998 1999 (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------- --------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash............................................. $ 183 $ 148 $ 149 $ 164 $ 164
Trade accounts receivable, less allowances of 13,135 11,818
$8,960 at June 27, 1998, $6,119 at July 3,
1999, $7,067 at March 27, 1999 and $5,242 at
April 1, 2000.................................. 16,562 22,699 22,699
Inventories
Finished goods................................. 104,472 82,086 80,328 91,441 91,441
Work in process................................ 4,940 2,433 2,182 1,677 1,677
Materials and supplies......................... 22,988 16,876 21,244 7,524 7,524
--------- --------- --------- --------- ---------
Total inventory.................................. 132,400 101,395 103,754 100,642 100,642
Prepaid expenses................................. 3,029 3,106 3,381 3,763 3,763
Deferred income taxes............................ 11,839 6,477 7,817 5,395 5,395
Other current assets............................. 1,884 3,676 5,938 1,035 1,035
--------- --------- --------- --------- ---------
Total current assets............................. 162,470 126,620 137,601 133,698 133,698
--------- --------- --------- --------- ---------
(Payable to) receivable from Sara Lee............ (11,088) 54,150 46,346 89,537 --
Trademarks and other assets...................... 11,715 11,269 10,945 10,882 10,882
Property
Machinery and equipment........................ 16,647 16,532 16,785 16,980 16,980
Furniture and fixtures......................... 61,481 67,751 66,020 57,638 57,638
Leasehold improvements......................... 88,067 88,611 89,179 86,202 86,202
Construction in progress....................... 9,874 8,687 7,905 15,352 15,352
Accumulated depreciation....................... (101,679) (120,430) (116,375) (111,526) (111,526)
--------- --------- --------- --------- ---------
Property, net.................................... 74,390 61,151 63,514 64,646 64,646
Deferred income taxes............................ 13,721 23,369 20,957 22,646 22,646
Goodwill, net.................................... 6,502 5,529 5,855 5,306 5,306
--------- --------- --------- --------- ---------
Total assets..................................... $ 257,710 $ 282,088 $ 285,218 $ 326,715 $ 237,178
========= ========= ========= ========= =========

LIABILITIES AND STOCKHOLDER'S EQUITY
Bank overdrafts.................................. $ 6,019 $ 4,023 $ 2,948 $ 2,242 $ 2,242
Accounts payable................................. 12,044 10,122 11,829 6,994 6,994
Accrued liabilities
Advertising and promotions..................... 7,033 7,583 6,521 8,870 8,870
Income and other taxes......................... 3,837 5,694 5,869 6,666 6,666
Payroll and benefits........................... 17,036 28,169 29,235 40,648 40,648
Rent, utilities, insurance and administration 11,515 11,855
fees......................................... 10,331 13,306 13,306
Product repairs................................ 7,000 6,100 6,325 5,800 5,800
Other.......................................... 2,397 1,354 2,348 2,518 2,518
Long-term debt due within 1 year................. 35 35 35 267 267
--------- --------- --------- --------- ---------
Total current liabilities........................ 66,916 74,935 75,441 87,311 87,311
--------- --------- --------- --------- ---------
Long-term debt................................... 3,810 3,775 3,775 3,735
Long-term debt to Sara Lee....................... -- -- -- --
Other liabilities................................ 125 216 206 173
Common stockholder's net investment
Preferred stock: (authorized 25,000,000 shares; -- --
$.01 par value) None issued.................. -- --
Common stock: (authorized 100,000,000 shares; -- --
$.01 par value) Issued--1,000 shares......... -- --
Capital surplus................................ -- -- -- --
Sara Lee Corporation equity.................... 187,251 203,966 206,489 236,135
Accumulated other comprehensive loss........... (392) (804) (693) (639)
--------- --------- --------- ---------
Total equity................................... 186,859 203,162 205,796 235,496
--------- --------- --------- --------- ---------
Total liabilities and common stockholder's $ 257,710 $ 282,088
equity......................................... $ 285,218 $ 326,715 $
========= ========= ========= ========= =========
</TABLE>

The accompanying Notes to Consolidated and Combined Financial Statements are an
integral part of these statements.

F-3
<PAGE>
COACH, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED 39 WEEKS ENDED
--------------------------------- -----------------------------
MARCH 27, APRIL 1,
JUNE 28, JUNE 27, JULY 3, 1999 2000
1997 1998 1999 (UNAUDITED) (UNAUDITED)
-------- -------- ------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales........................... $540,366 $522,220 $507,781 $389,502 $427,232
Cost of sales....................... 227,086 235,512 226,190 173,811 173,199
-------- -------- -------- -------- --------
Gross profit........................ 313,280 286,708 281,591 215,691 254,033
Selling, general and administrative
expenses.......................... 269,011 261,695 255,008 186,071 206,399
Reorganization costs................ -- -- 7,108 7,108 --
-------- -------- -------- -------- --------

Operating income.................... 44,269 25,013 19,475 22,512 47,634
Interest income..................... -- 272 27 19 26
Interest expense.................... (492) (508) (441) (339) (317)
Minority interest in subsidiary..... (95) 66 -- -- --
-------- -------- -------- -------- --------
Income before income taxes.......... 43,682 24,843 19,061 22,192 47,343
Income taxes........................ 11,645 4,180 2,346 2,954 15,174
-------- -------- -------- -------- --------
Net income.......................... $ 32,037 $ 20,663 $ 16,715 $ 19,238 $ 32,169
======== ======== ======== ======== ========

Net income per common share--basic.. $ $ $ $ $
======== ======== ======== ======== ========
--diluted......................... $ $ $ $ $
======== ======== ======== ======== ========
Shares used in computing net income
per common share--basic...........
======== ======== ======== ======== ========
--diluted.........................
======== ======== ======== ======== ========
</TABLE>

The accompanying Notes to the Consolidated and Combined Financial Statements are
an
integral part of these statements.

F-4
<PAGE>
COACH, INC.

CONSOLIDATED AND COMBINED STATEMENT OF EQUITY

<TABLE>
<CAPTION>
ACCUMULATED
SARA LEE OTHER
CORPORATION COMPREHENSIVE COMPREHENSIVE
TOTAL EQUITY INCOME (LOSS) INCOME (LOSS)
--------- ------------ --------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCES AT JUNE 29, 1996....... $131,961 $132,401 $(440)
Net income.................... 32,037 32,037 -- $32,037
Translation adjustments....... 494 -- 494 494
Minimum pension liability..... (186) -- (186) (186)
-------
Comprehensive income.......... $32,345
=======
Capital contribution.......... 1,055 1,055 --
-------- -------- -----
BALANCES AT JUNE 28, 1997....... 165,361 165,493 (132)
Net income.................... 20,663 20,663 -- $20,663
Translation adjustments....... 134 -- 134 134
Minimum pension liability..... (394) -- (394) (394)
-------
Comprehensive income.......... $20,403
=======
Capital contribution.......... 1,095 1,095 --
-------- -------- -----
BALANCES AT JUNE 27, 1998....... 186,859 187,251 (392)
Net income.................... 16,715 16,715 -- $16,715
Translation adjustments....... (9) -- (9) (9)
Minimum pension liability..... (403) -- (403) (403)
-------
Comprehensive income.......... $16,303
-------- -------- ----- =======
BALANCES AT JULY 3, 1999........ 203,162 203,966 (804)
Net income(1)................. 32,169 32,169 -- $32,169
Translation adjustments(1).... 165 -- 165 165
-------
Comprehensive income(1)....... $32,334
-------- -------- ----- =======
BALANCES AT APRIL 1, 2000(1).... $235,496 $236,135 $(639)
======== ======== =====
</TABLE>

------------------------

(1) unaudited

The accompanying Notes to the Consolidated and Combined Financial Statements are
an
integral part of these statements.

F-5
<PAGE>
COACH, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
39 WEEKS ENDED
YEARS ENDED -------------------------
--------------------------------- MARCH 27, APRIL 1,
JUNE 28, JUNE 27, JULY 3, 1999 2000
1997 1998 1999 (UNAUDITED) (UNAUDITED)
----------- -------- -------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income........................... $ 32,037 $ 20,663 $ 16,715 $ 19,238 $ 32,169
Adjustments for noncash charges
included in net income:
Depreciation....................... 19,200 21,571 21,339 17,038 15,738
Amortization of intangibles........ 2,626 1,213 917 600 973
Reorganization costs............... -- -- 7,108 7,108 --
(Decrease) increase in deferred
taxes............................ (2,170) 1,172 (4,286) (3,214) 1,805
Other noncash credits, net......... 707 (766) 2,843 1,020 (987)
Changes in current assets and
liabilities:
Decrease (increase) in trade
accounts receivable............ 2,476 4,473 1,315 (3,428) (10,880)
(Increase) decrease in
inventories.................... (9,401) (30,206) 30,977 28,639 762
(Increase) decrease in other
current assets................. (880) 9,347 (1,876) (4,410) 1,984
Increase (decrease) in accounts
payable........................ 768 2,337 (1,922) (215) (3,128)
(Decrease) increase in accrued
liabilities.................... (9,414) (12,629) 5,875 5,711 17,034
-------- -------- -------- -------- --------
Net cash from operating
activities....................... 35,949 17,175 79,005 68,087 55,470
-------- -------- -------- -------- --------

INVESTMENT ACTIVITIES
Purchases of property and equipment.. (30,218) (15,178) (13,519) (8,394) (19,417)
Acquisition of minority interest..... -- -- (896) (896) --
Dispositions of property............. 886 840 2,646 1,696 939
-------- -------- -------- -------- --------
Net cash used in investment
activities....................... (29,332) (14,338) (11,769) (7,594) (18,478)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES
Additional capital contribution...... 1,055 1,095 -- -- --
Net transfers from (to) Sara Lee
Corporation........................ 1,759 2,788 (65,238) (57,434) (35,387)
Bank overdrafts...................... (9,991) (6,731) (1,996) (3,071) (1,781)
Repayments of long-term debt......... -- -- (35) (35) (35)
Borrowings of long-term debt......... -- -- -- -- 227
-------- -------- -------- -------- --------
Net cash used in financing
activities....................... (7,177) (2,848) (67,269) (60,540) (36,976)
-------- -------- -------- -------- --------
Effect of changes in foreign exchange
rates on cash...................... 18 7 (2) 13 --
-------- -------- -------- -------- --------
(Decrease) increase in cash and
equivalents........................ (542) (4) (35) (34) 16
Cash and equivalents at beginning of
year............................... 729 187 183 183 148
-------- -------- -------- -------- --------
Cash and equivalents at end of
period............................. $ 187 $ 183 $ 148 $ 149 $ 164
======== ======== ======== ======== ========
</TABLE>

The accompanying Notes to the Consolidated and Combined Financial Statements are
an
integral part of these statements.

F-6
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

1.) BACKGROUND AND BASIS OF PRESENTATION

On May 30, 2000, Sara Lee Corporation ("Sara Lee") announced its plan to
create an independent publicly traded company, Coach, Inc. ("Coach" or the
"Company") comprised of Sara Lee's branded leather goods and accessories
business. After completion of Coach's initial public offering, Sara Lee will own
at least 80.1% of Coach's outstanding common stock.

Coach designs, manufactures, markets and sells primarily fine leather hand
bags and accessories. Coach products are manufactured by third-party suppliers
as well as by Coach-operated manufacturing facilities. Coach markets products
via company operated retail and factory stores, selected upscale department
stores and specialty retailers, direct mail catalogs, international retail
stores and the Internet. As of April 1, 2000, Coach operates 2 manufacturing
facilities, 3 warehouse, distribution and product development centers,
104 United States retail stores, 62 United States factory stores and 2 retail
locations in the United Kingdom.

Coach was formed in 1941 and was acquired by Sara Lee in July 1985 in a
transaction accounted for as a purchase. Coach is operated as a division in the
United States and a subsidiary in foreign countries. On June 1, 2000, Coach was
incorporated under the laws of the State of Maryland and will begin operating as
a separate legal entity in July 2000.

Sara Lee and Coach will enter into a Master Separation Agreement, General
Assignment and Assumption Agreement, Indemnification and Insurance Matters
Agreement, Master Transitional Services Agreement, Real Estate Matters
Agreement, Employee Matters Agreement and Tax Sharing Agreement (collectively
referred to as the "Separation Agreements") (See Note 13 of the consolidated and
combined financial statements). Pursuant to the Separation Agreements, Sara Lee
will transfer to Coach the assets and liabilities that relate to the Coach
business prior to the date of completion of Coach's initial public offering (the
"separation date").

The consolidated and combined financial statements of Coach reflect the
historical results of operations and cash flows of the Coach leather goods and
accessories business of Sara Lee during each respective period. Under Sara Lee
ownership, Coach's United States operations were a division of Sara Lee and not
a separate legal entity, while Coach's foreign operations were subsidiaries of
Sara Lee. The historical financial statements have been prepared using Sara
Lee's historical basis in the assets and liabilities and the results of Coach's
business. The financial information included herein may not reflect the
consolidated financial position, operating results, changes in stockholder's net
investment and cash flows of Coach in the future, or what they would have been
had Coach been a separate stand-alone entity during the periods presented. On
the separation date, Coach will begin operating as a separate legal entity.

The consolidated financial statements include allocations of certain Sara
Lee expenses, including certain accounting, treasury, real estate, human
resources, and other Sara Lee corporate services and infrastructure costs. The
expense allocations have been determined on the basis that Sara Lee and Coach
considered to be reasonable reflections of the utilization of services provided
by Sara Lee.

F-7
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

2.) SIGNIFICANT ACCOUNTING POLICIES

Fiscal year--Coach's fiscal year ends on the Saturday closest to June 30.
Fiscal year 1999 was a 53-week year, while fiscal years 1998 and 1997 were
52-week years. Unless otherwise stated, references to years in the financial
statements relate to fiscal years.

Preparation of financial statements--The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities; the disclosure of contingent assets and liabilities at the date of
the financial statements; and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Interim financial information--The financial information as of March 27,
1999, April 1, 2000, and the 39 weeks ended March 27, 1999 and April 1, 2000 is
unaudited and includes adjustments, consisting only of normal and recurring
accruals, that management considered necessary for a fair presentation of
Coach's consolidated financial position, operating results and cash flows.
Results for the 39 weeks ended March 27, 1999 and April 1, 2000 are not
necessarily indicative of results to be expected for the full fiscal year or for
any future period.

Consolidation--The consolidated and combined financial statements include
the accounts of Coach. All significant intercompany transactions and balances
within Coach are eliminated in consolidation.

Cash and cash equivalents--Cash consists of cash balances and short term
investments with a maturity of less than 90 days.

Inventories--Inventories are valued at the lower of cost (determined by the
first-in, first-out method) or market. Inventory cost includes material and
conversion costs.

Property--Property and equipment are stated at cost less accumulated
depreciation. Depreciation is calculated on a straight line basis over the
estimated useful lives of the assets. Machinery and equipment are depreciated
over lives of 5 to 7 years and furniture and fixtures are depreciated over lives
of 3 to 5 years. Leasehold improvements are amortized over the shorter of their
estimated useful lives or the related lease terms. Maintenance and repair costs
are charged to earnings while expenditures for major renewals and improvements
are capitalized. Upon the disposition of property and equipment, the cost and
related accumulated depreciation are removed from the accounts.

Pre-opening costs--Costs associated with the opening of new retail stores
are expensed in the periods incurred.

Software development costs--Prior to the adoption date of AICPA Statement of
Position No. (SOP) 98-1 in 1999, Coach expensed all software development costs
as incurred, which included $7.0 million in 1997. Since adoption of SOP 98-1,
Coach's policy is to capitalize certain costs relating to software developed and
implemented for internal use and to amortize these costs over a period of 3 to 5
years. No material software development costs were incurred in 1998, 1999 or
2000.

F-8
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

2.) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangible Assets--The excess of cost over fair market value of tangible net
assets and trademarks of acquired businesses is amortized on a straight line
basis over the periods of expected benefit, which range from 5 to 40 years.
Accumulated amortization of intangible assets at June 27, 1998, July 3, 1999,
March 27, 1999 and April 1, 2000 is $6,421, $2,960, $2,878 and $3,100,
respectively.

Long-Lived Assets--Long-lived assets primarily include property,
identifiable intangible assets and goodwill. Long-lived assets being retained
for use by Coach are periodically reviewed for impairment by comparing the
carrying value of the assets with their estimated future undiscounted cash
flows. If it is determined that an impairment loss has occurred, the loss would
be recognized during the period. The impairment loss is calculated as the
difference between asset carrying values and the present value of estimated net
cash flows or comparable market values, giving consideration to recent operating
performance.

Long-lived assets which are to be disposed of are reported at the lower of
carrying value or fair value less cost to sell. Reductions in carrying value are
recognized in the period in which management commits to a plan to dispose of the
assets.

Transactions with Sara Lee--Payable to/receivable from Sara Lee represents
the net amount due to or from Sara Lee as a result of intercompany transactions
between Coach and Sara Lee. See Note 13 for a description of the relationship
with Sara Lee.

Revenue Recognition--Sales are recognized at the "point of sale", which
occurs when merchandise is sold in an "over the counter" transaction or upon
shipment to a customer. The Company maintains a reserve for potential product
returns and records its provision for estimated product returns based upon
historical experience. The charge for estimated product returns is recorded
against sales for the period. Certain royalty revenues are earned through
license agreements with manufacturers of other consumer products that
incorporate the Coach brand. Revenue earned under these contracts is accrued
based upon reported sales from the licensee.

Advertising--Advertising costs, which include media and production totaled
$14,337, $16,777 and $12,598 for the fiscal years 1997, 1998 and 1999. For the
39 weeks ended March 27, 1999 and April 1, 2000, these costs were $9,277 and
$11,758, respectively. Advertising costs are expensed when the advertising first
takes place.

Stock Based Compensation--Employee stock options are accounted for under the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB No. 25). APB No. 25 requires the use of the intrinsic
value method, which measures compensation cost as the excess, if any, of the
quoted market price of the stock at grant over the amount an employee must pay
to acquire the stock. The Company makes pro forma disclosures of net earnings
and earnings per share as if the fair value based method of accounting had been
applied as required by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("SFAS No. 123").

F-9
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

2.) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income taxes--Coach's operating results historically have been included in
Sara Lee's consolidated U.S. and state income tax returns and in the tax returns
of certain Sara Lee foreign operations. Given Sara Lee's continued ownership of
greater than 80% of Coach's common stock, Coach will continue to be included in
these consolidated tax returns. The provision for income taxes in Coach's
financial statements has been prepared as if Coach was a stand-alone entity and
filed separate tax returns. Deferred tax assets and liabilities are recognized
for the expected tax consequences of temporary differences between the tax bases
of assets and liabilities and their reported amounts.

Foreign Currency--The functional currency of the Company's foreign
operations is the applicable local currency. Assets and liabilities are
translated into U.S. dollars using the current exchange rates in effect at the
balance sheet date, while revenues and expenses are translated at the average
exchange rates for the period. The resulting translation adjustments are
recorded as a component of other comprehensive income within stockholders
equity. Gains and losses from foreign currency transactions are included in net
income.

3.) STOCK-BASED COMPENSATION

SARA LEE STOCK BASED PLANS

Coach employees participate in stock-based compensation plans of Sara Lee.
Sara Lee maintains various stock option, employee stock purchase and stock award
plans.

STOCK OPTIONS--The exercise price of each stock option equals 100% of the
market price of Sara Lee's stock on the date of grant and generally has a
maximum term of 10 years. Options generally vest ratably over three years.
During 1998, Sara Lee instituted a broad-based stock option incentive program
under which Sara Lee granted options, to essentially all full-time Coach
employees, to purchase a total of approximately 449 shares of Sara Lee common
stock.

Under certain stock option plans, an active employee may receive a
replacement Sara Lee stock option equal to the number of shares surrendered upon
a stock-for-stock exercise. The exercise price of the replacement option is 100%
of the market value at the date of exercise of the original option and will
remain exercisable for the remaining term of the original option. Replacement
stock options generally vest six months from the grant date.

F-10
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

3.) STOCK-BASED COMPENSATION (CONTINUED)
A summary of options held by Coach employees under the Sara Lee option plans
follows:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED
SARA LEE AVERAGE
OUTSTANDING EXERCISABLE EXERCISE
(SHARES IN THOUSANDS) OPTIONS SHARES PRICE
--------------------- ------------ ------------ ---------
<S> <C> <C> <C>
Outstanding at June 29, 1996......... 728 396 $12.59
Granted............................ 447
Exercised.......................... (342)
Canceled/Expired................... (74)
------
Outstanding at June 28, 1997......... 759 333 14.12
Granted............................ 1,362
Exercised.......................... (530)
Canceled/Expired................... (212)
Transfers.......................... 50
------
Outstanding at June 27, 1998......... 1,429 246 20.96
Granted............................ 584
Exercised.......................... (232)
Canceled/Expired................... (263)
------
Outstanding at July 3, 1999.......... 1,518 603 23.02
Granted............................ 563
Exercised.......................... (164)
Canceled/Expired................... (188)
Transfers.......................... 111
------
Outstanding at April 1, 2000......... 1,840 950 23.36
======
</TABLE>

The fair value of each Coach option grant under the Sara Lee plans is
estimated on the date of grant using the Black-Scholes option-pricing model and
the following weighted average assumptions:

<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Expected lives.............................. 2.7 years 3.8 years 3.5 years
Risk-free interest rate..................... 6.1% 6.0% 5.2%
Expected volatility......................... 22.4% 22.6% 24.1%
Dividend yield.............................. 2.2% 1.7% 1.8%
</TABLE>

The weighted average fair value of individual options granted during 1997,
1998 and 1999 was $2.80, $4.44 and $4.73, respectively.

F-11
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

3.) STOCK-BASED COMPENSATION (CONTINUED)

EMPLOYEE STOCK PURCHASE PLAN (ESPP). Sara Lee maintains an ESPP that permits
full-time Coach employees to purchase a limited number of Sara Lee common shares
at 85% of market value. Under the plan, Sara Lee sold 51, 54 and 81 shares to
Coach employees in 1997, 1998 and 1999, respectively. Pro forma compensation
expense is calculated for the fair value of the employees' purchase rights using
the Black-Scholes model. Assumptions include an expected life of 1/4 of a year
and weighted average risk-free interest rates of 5.1%, 5.2% and 4.6% in 1997,
1998 and 1999, respectively. Other underlying assumptions are consistent with
those used for the Sara Lee stock option plans described above.

Under APB 25, no compensation cost is recognized for stock options and
replacement stock options under the various Sara Lee stock-based compensation
plans and shares purchased under the ESPP. Had compensation cost for the grants
for stock-based compensation been determined consistent with SFAS 123, Coach's
pro forma net income and per share net income for 1997, 1998 and 1999 would have
been as follows:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net income..................................... $31,342 $18,489 $14,615
Net income per share--basic.................... $ $ $
--diluted.................................... $ $ $
</TABLE>

The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1996,
and additional awards in future years are anticipated.

STOCK UNIT AWARDS. Stock unit awards of Sara Lee stock are restricted and
subject to forfeiture until Sara Lee and Coach achieve certain financial goals.
Performance goals typically extend over three years. All restricted stock awards
entitle the participant to dividends that are escrowed until the participant
receives the shares. The value of stock awards is accrued over the performance
goal period.

COACH STOCK BASED PLANS

STOCK OPTIONS. Concurrent with the initial public offering, Coach intends
to establish a stock option plan for Coach employees. Coach employees can
continue to participate in the Sara Lee plan while Sara Lee maintains an
ownership interest in Coach. No future stock option grants will be made under
the Sara Lee plan to Coach employees; instead, future grants to Coach employees
will be made under the Coach plan. Certain Coach executive employees who are
Sara Lee option holders will receive the right to convert Sara Lee options into
Coach options at the IPO date using a conversion ratio of Coach's stock price to
Sara Lee's stock price with a conversion ratio floor of 1.00. Any Sara Lee
option converted into a Coach option may not be exercised until the earlier of
one year following conversion, or that time when Sara Lee ceases to own a
majority of Coach, subject to the original vesting requirements. At April 1,
2000, there were 1,611 stock options

F-12
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

3.) STOCK-BASED COMPENSATION (CONTINUED)
outstanding and held by executive employees of Coach, of which 823 were
exercisable at a weighted average exercise price of $23.82. Sara Lee options
which are converted to Coach options will result in an expense equal to the
intrinsic value (if any) on the date of conversion, being recorded over the
remaining vesting period of the option.

ESPP--Coach will continue to participate in the Sara Lee ESPP until either
Sara Lee completes an exchange or other distribution of Coach, or Coach
establishes a separate ESPP.

STOCK UNITS--Certain Coach employees who hold approximately 30 Sara Lee
restricted stock units will be given the election to convert these stock units
into Coach restricted stock units maintaining the same market value relationship
on the date of conversion.

4.) MINORITY INTEREST IN SUBSIDIARIES

Coach owned 60% of an Italian manufacturing operation. At the beginning of
1999, Coach purchased equity held by the minority partner and subsequently
closed this operation and incurred shutdown costs of $331 that are discussed in
Note 8.

5.) LONG TERM DEBT, CREDIT FACILITIES AND CONCENTRATION OF CREDIT RISK

Long-term debt consists of an 8.77% loan that matures in 2015. Interest
expense for this loan for fiscal years 1997, 1998 and 1999 and the 39 weeks
ended March 27, 1999 and April 1, 2000 was $337, $337, $336, $252 and $251,
respectively. Cash interest paid for fiscal years 1997, 1998, 1999 and the
39 weeks ended March 27, 1999 and April 1, 2000 was $0, $268, $336, $336 and
$333, respectively. Debt service payments under this loan for the years ending
2000 through 2004 are $371, $373, $399, $398 and $426, respectively.

Coach participates in a cash concentration system that requires that cash
balances be deposited with Sara Lee which are netted against any borrowings or
billings that are provided by Sara Lee. The balance due under this arrangement
is included in the Payable to/receivable from Sara Lee. For the periods
presented, no interest is charged or earned on these balances. It is the intent
of the parties that prior to the initial public offering the balance on the
Payable to/receivable from Sara Lee will be capitalized into Sara Lee's
investment in Coach. No cash will be paid or collected by either party.

Subsequent to the initial public offering Coach will continue to participate
in the Sara Lee cash concentration system. The maximum borrowings from Sara Lee
under this arrangement is $75 million which will accrue interest at US dollar
LIBOR plus 30 basis points. Any receivable balance from Sara Lee under this
arrangement will accrue interest at US dollar LIBOR minus 20 basis points. Upon
Sara Lee's owning less than a majority, this facility will terminate and become
due. The credit facility will include certain restrictions on additional secured
debt and sale/leaseback transactions and certain interest coverage and lease
covenants.

As described in Note 15 (Subsequent Events), Coach will undergo an equity
restructuring which will result in $190 million of long-term debt to a
subsidiary of Sara Lee.

F-13
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

6.) LEASES

Coach, as a division of Sara Lee, leases certain office, distribution,
retail and manufacturing facilities. The lease agreements, which expire at
various dates through 2015, are subject, in some cases, to renewal options and
provide for the payment of taxes, insurance and maintenance. Certain leases
contain escalation clauses resulting from the pass-through of increases in
operating costs, property taxes and the effect on costs from changes in consumer
price indices. Certain rentals are also contingent upon factors such as future
sales.

Rent-free periods and other incentives granted under certain leases and
scheduled rent increases are charged to rent expense on a straight line basis
over the related terms of such leases. Contingent rentals are recognized when
the achievement of the target, which triggers the related payment, are
considered probable. Rent expense for the Company's operating leases, consisted
of the following:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Minimum rentals................................ $25,713 $25,642 $26,191
Contingent rentals............................. 2,680 2,109 2,163
------- ------- -------
Total Rent Expense............................. $28,393 $27,751 $28,354
======= ======= =======
</TABLE>

Future minimum rental payments under non-cancellable operating leases are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED AMOUNT
---------- ------
<S> <C>
2000........................................................ $ 23,607
2001........................................................ 23,274
2002........................................................ 20,860
2003........................................................ 18,440
2004........................................................ 17,519
Subsequent to 2004.......................................... 83,523
--------
Total minimum future rental payments........................ $187,223
========
</TABLE>

Certain operating leases provide for renewal for periods of 3 to 5 years at
their fair rental value at the time of renewal. In the normal course of
business, operating leases are generally renewed or replaced by new leases.

7.) CONTINGENCIES

Coach is a party to several pending legal proceedings and claims. Although
the outcome of such items cannot be determined with certainty, Sara Lee's and
Coach's general counsel and management are of the opinion that the final outcome
should not have a material effect on Coach's results of operations or financial
position.

F-14
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

8.) REORGANIZATION COSTS

In the second quarter of 1999, the management of Coach and Sara Lee
committed to a plan involving the closure of the Carlstadt, New Jersey warehouse
and distribution center; the closure of the Italian manufacturing operation; and
the reorganization of the Florida manufacturing facility. The reorganization
plan included the elimination of 737 employee positions. These actions, intended
to reduce costs, resulted in the transfer of production to lower cost
third-party manufacturers and the consolidation of all distribution functions at
the Jacksonville, Florida distribution center.

During 1999, Coach closed the Carlstadt, New Jersey warehouse and
distribution center and the Italian manufacturing operation. As contemplated in
the original plan, a portion of the Carlstadt facility remains in use for
product development. Related to these facility closures and the reorganization
activities at the Florida manufacturing facility, 737 employees were terminated.
The composition of the reorganization reserves is set forth in the table below.
At April 1, 2000, all reorganization actions were complete and remaining
workers' separation costs relate to unpaid costs for terminated employees.

<TABLE>
<CAPTION>
WRITE-DOWN OF REORGANIZATION
ORIGINAL LONG-LIVED ASSETS REORGANIZATION RESERVES AS OF
REORGANIZATION TO NET REALIZABLE CASH RESERVES AS OF CASH PAYMENTS APRIL 1, 2000
RESERVES VALUE PAYMENTS JULY 3, 1999 (UNAUDITED) (UNAUDITED)
-------------- ----------------- --------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Workers' separation costs... $5,893 -- ($4,262) $1,631 ($1,389) $ 242
Lease termination costs..... 1,155 -- -- 1,155 (1,155) --
Anticipated losses on
disposal of fixed
assets.................... 60 ($60) -- -- -- --
------ ---- ------- ------ ------- ------

Total reorganization
reserves.................. $7,108 ($60) ($4,262) $2,786 ($2,544) $ 242
====== ==== ======= ====== ======= ======
</TABLE>

9.) RETIREMENT PLANS

Coach sponsors a noncontributory defined benefit plan, The Coach Leatherware
Company, Inc. Supplemental Pension Plan, for individuals who are a part of
collective bargaining arrangements.

Employees who meet certain eligibility requirements and are not part of a
collective bargaining arrangement participate in defined benefit pension plans
sponsored by Sara Lee. These defined benefit pension plans include employees
from a number of domestic Sara Lee business units. The annual cost of the Sara
Lee defined benefit plans is allocated to all of the participating businesses
based upon a specific actuarial computation which is consistently followed. All
obligations pursuant to these plans are obligations of Sara Lee and will
continue to be obligations of Sara Lee after the initial public offering.

F-15
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

9.) RETIREMENT PLANS (CONTINUED)
The annual expense incurred by Coach for the defined benefit plans is as
follows:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Coach Leatherware Company, Inc.
Supplemental Pension Plan....................... $ 268 $ 326 $ 386
Participation in Sara Lee sponsored
defined benefit plans........................... 1,044 1,331 2,304
------ ------ ------
Total defined benefit plan expense.............. $1,312 $1,657 $2,690
====== ====== ======
</TABLE>

The components of the Coach Leatherware Company, Inc. Supplemental Pension
Plan were:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Components of defined benefit net
periodic pension cost:
Service cost...................................... $ 309 $ 347 $ 436
Interest cost..................................... 184 218 282
Expected return on assets......................... (239) (254) (361)
Amortization of:
Net initial asset............................... (50) (50) (50)
Prior service cost.............................. 59 59 59
Net actuarial loss.............................. 5 6 20
------ ------ ------
Net periodic pension cost......................... $ 268 $ 326 $ 386
====== ====== ======
</TABLE>

F-16
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

9.) RETIREMENT PLANS (CONTINUED)
The funded status of the Coach Leatherware Company, Inc. Supplemental
Pension Plan at the respective year-ends was:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Projected benefit obligation:
Beginning of year............................... $2,567 $3,052 $4,583
Service cost.................................... 309 348 436
Interest cost................................... 184 218 282
Benefits paid................................... (97) (83) (105)
Actuarial (gain) loss........................... 89 1,048 (87)
------ ------ ------
End of year..................................... $3,052 $4,583 $5,109
------ ------ ------
Fair value of plan assets:
Beginning of year............................... $2,758 $2,952 $4,313
Actual return/(loss) on plan assets............. 291 952 (99)
Employer contributions.......................... -- 492 197
Benefits paid................................... (97) (83) (105)
------ ------ ------
End of year..................................... $2,952 $4,313 $4,306
------ ------ ------
Funded Status..................................... $ (100) $ (270) $ (803)
Unrecognized:
Prior service cost.............................. 585 526 234
Net actuarial loss (gain)....................... 384 729 1,081
Net initial asset............................... (198) (149) (98)
------ ------ ------
Prepaid benefit cost recognized................... $ 671 $ 836 $ 414
====== ====== ======
Amounts recognized on the consolidated balance
sheets:
Other noncurrent assets......................... $ 585 $ 526 $ 234
Noncurrent benefit liability.................... (100) (270) (803)
Accumulated other comprehensive income.......... 186 580 983
------ ------ ------
Prepaid benefit cost recognized................... $ 671 $ 836 $ 414
====== ====== ======
</TABLE>

F-17
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

9.) RETIREMENT PLANS (CONTINUED)

Net pension expense for the Coach Leatherware Company, Inc. Plan is
determined using assumptions as of the beginning of each year. Funded status is
determined using assumptions as of the end of each year. The assumptions used at
the respective year-ends were:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Discount rate....................................... 7.25% 6.25% 6.25%
Long-term rate of return on plan assets............. 8.75 8.50 8.50
Rate of compensation increase....................... 4.50 4.50 4.50
</TABLE>

10.) INCOME TAXES

The provisions for income taxes computed by applying the U.S. statutory rate
to income before taxes as reconciled to the actual provisions were:

<TABLE>
<CAPTION>
1997 1998 1999
------------------- ------------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before provision
for income taxes:
United States.................. $28,727 65.8% $10,863 43.7% $ 8,919 46.8%
Puerto Rico.................... 16,844 38.5 16,523 66.5 10,241 53.7
Foreign........................ (1,889) (4.3) (2,543) (10.2) (99) (0.5)
------- ------ ------- ------ ------- ------
$43,682 100.0% $24,843 100.0% $19,061 100.0%
======= ====== ======= ====== ======= ======

Tax expense at U.S. statutory
rate........................... $15,289 35.0% $ 8,695 35.0% $ 6,671 35.0%
State taxes, net of
federal benefit................ 1,856 4.3 416 1.7 889 4.7

Difference between U.S. and
Puerto Rican rates............. (5,073) (11.6) (5,010) (20.2) (3,101) (16.3)
Nondeductible amortization....... 760 1.7 284 1.1 187 1.0
Product donations................ (185) (0.4) (229) (0.9) (968) (5.1)
Other, net....................... (1,002) (2.3) 24 0.1 (1,332) (7.0)
------- ------ ------- ------ ------- ------
Taxes at effective worldwide
tax rates...................... $11,645 26.7% $ 4,180 16.8% $ 2,346 12.3%
======= ====== ======= ====== ======= ======
</TABLE>

F-18
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

10.) INCOME TAXES (CONTINUED)
Current and deferred tax provisions (benefits) were:

<TABLE>
<CAPTION>
1997 1998 1999
-------------------- -------------------- --------------------
CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED
------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Federal.............. $10,107 $(1,862) $1,553 $1,057 $4,680 $(3,643)
Puerto Rico.......... 853 (31) 815 (42) 585 (102)
State................ 2,855 (277) 640 157 1,367 (541)
------- ------- ------ ------ ------ -------
$13,815 $(2,170) $3,008 $1,172 $6,632 $(4,286)
======= ======= ====== ====== ====== =======
</TABLE>

Following are the components of the deferred tax (benefits) provisions
occurring as a result of transactions being reported in different years for
financial and tax reporting:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Depreciation.................................... $(2,056) $(1,783) $(1,852)
Employee benefits............................... 1,682 1,997 (3,920)
Advertising accruals............................ 2,210 (52) 52
Nondeductible reserves.......................... (6,359) 221 3,788
Other, net...................................... 2,353 789 (2,354)
------- ------- -------
$(2,170) $ 1,172 $(4,286)
======= ======= =======
</TABLE>

The deferred tax assets at the respective year-ends were as follows:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Deferred tax assets
Reserves not deductible until paid........... $12,517 $12,296 $ 7,245
Pension and other
employee benefits.......................... 2,648 650 4,570
Property, plant and equipment................ 9,344 11,127 14,242
Other........................................ 2,223 1,487 3,789
------- ------- -------
Net deferred tax assets........................ $26,732 $25,560 $29,846
======= ======= =======
</TABLE>

11.) SEGMENT INFORMATION

The Company operates its business in two reportable segments: Direct to
Consumer and Wholesale. The Company's reportable segments represent channels of
distribution that offer similar merchandise, service and marketing strategies.
Sales of Coach products through company owned retail stores, the Coach catalog
and the Internet constitute the Direct to Consumer segment. Wholesale refers to
sales of Coach products to other retailers. In deciding how to allocate
resources and assess performance, Coach's executive officers regularly evaluate
the sales and

F-19
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

11.) SEGMENT INFORMATION (CONTINUED)
operating income of these segments. Operating income is the gross margin of the
segment at standard cost less direct expenses of the segment. Unallocated
corporate expenses include manufacturing variances, general marketing,
administration and information systems, distribution and customer service
expenses.

<TABLE>
<CAPTION>
DIRECT CORPORATE
TO CONSUMER WHOLESALE UNALLOCATED TOTAL
------------- ---------- -------------- ---------
<S> <C> <C> <C> <C>
1997
Net sales........................... $330,978 $209,388 -- $ 540,366
Operating income.................... 93,615 74,036 $(123,382) 44,269
Interest expense.................... -- -- 492 492
Minority interest expense........... -- -- 95 95
Income before taxes................. 93,615 74,036 (123,969) 43,682
Depreciation and amortization....... 8,064 2,448 11,314 21,826
Total assets........................ 115,033 62,128 84,068 261,229
Additions to long-lived assets...... 15,948 2,166 12,640 30,754
</TABLE>

<TABLE>
<CAPTION>
DIRECT CORPORATE
TO CONSUMER WHOLESALE UNALLOCATED TOTAL
------------- ---------- -------------- ---------
<S> <C> <C> <C> <C>
1998
Net sales........................... $333,547 $188,673 -- $522,220
Operating income.................... 78,899 60,708 $(114,594) 25,013
Interest income..................... -- -- 272 272
Interest expense.................... -- -- 508 508
Minority interest income............ -- -- 66 66
Income before taxes................. 78,899 60,708 (114,764) 24,843
Depreciation and amortization....... 9,313 2,274 11,197 22,784
Total assets........................ 136,748 64,238 56,724 257,710
Additions to long-lived assets...... 7,562 2,118 5,798 15,478
</TABLE>

<TABLE>
<CAPTION>
DIRECT CORPORATE
TO CONSUMER WHOLESALE UNALLOCATED TOTAL
------------- ---------- -------------- ---------
<S> <C> <C> <C> <C>
1999
Net sales........................... $336,506 $171,275 -- $507,781
Operating income.................... 80,615 53,193 $(114,333)(1) 19,475
Interest income..................... -- -- 27 27
Interest expense.................... -- -- 441 441
Income before taxes................. 80,615 53,193 (114,747)(1) 19,061
Depreciation and amortization....... 9,876 2,153 10,227 22,256
Total assets........................ 116,200 48,539 117,349 282,088
Additions to long-lived assets...... 6,308 434 7,259 14,001
</TABLE>

Note (1)--Includes reorganization costs totaling $7,108 in 1999.

F-20
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

11.) SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
DIRECT CORPORATE
TO CONSUMER WHOLESALE UNALLOCATED(1) TOTAL
------------- ---------- -------------- ---------
<S> <C> <C> <C> <C>
39 WEEKS ENDED
MARCH 27, 1999
Net sales........................... $256,568 $132,934 -- $389,502
Operating income.................... 66,458 42,102 $ (86,048)(1) 22,512
Interest income..................... -- -- 19 19
Interest expense.................... -- -- 339 339
Income before taxes................. 66,458 42,102 (86,368)(1) 22,192
Depreciation and amortization....... 7,286 1,661 8,691 17,638
Total assets........................ 116,090 50,792 118,336 285,218
Additions to long-lived assets...... 4,573 111 3,710 8,394
</TABLE>

<TABLE>
<CAPTION>
DIRECT CORPORATE
TO CONSUMER WHOLESALE UNALLOCATED TOTAL
------------- ---------- -------------- ---------
<S> <C> <C> <C> <C>
39 WEEKS ENDED
APRIL 1, 2000
Net sales........................... $271,527 $155,705 -- $427,232
Operating income.................... 80,984 56,301 $ (89,651) 47,634
Interest income..................... -- -- 26 26
Interest expenses................... -- -- 317 317
Income before taxes................. 80,984 56,301 (89,942) 47,343
Depreciation and amortization....... 7,708 1,135 7,868 16,711
Total assets........................ 123,706 57,240 145,769 326,715
Additions to long-lived assets...... 14,220 847 4,387 19,454
</TABLE>

Note (1)--Includes reorganization costs totaling $7,108 in 1999.

The following is a summary of the common costs not allocated in the
determination of segment performance.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED 39 WEEKS ENDED
--------------------------------- --------------------------------
1997 1998 1999 MARCH 27, 1999 APRIL 1, 2000
--------- --------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Manufacturing variances..... $ 9,036 $ 10,083 $ 13,641 $ 9,100 $ 9,143
Advertising, marketing and
design.................... 28,447 32,840 32,514 23,068 28,270
Administration and
information systems....... 58,336 44,678 35,187 27,050 34,708
Distribution and customer
service................... 27,563 26,993 25,883 19,722 17,530
Reorganization costs........ -- -- 7,108 7,108 --
--------- --------- --------- -------- ---------
$(123,382) $(114,594) $(114,333) $(86,048) $ (89,651)
========= ========= ========= ======== =========
</TABLE>

F-21
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND
THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

12.) GEOGRAPHIC AREA INFORMATION

As of April 1, 2000, Coach operates 104 retail stores and 62 factory stores
in the United States, 2 retail locations in the United Kingdom, and operates 5
manufacturing, distribution and product development locations in the United
States, Puerto Rico and Italy. Geographic revenue information is based on the
location of the end customer. Geographic long-lived asset information is based
on the physical location of the assets at the end of each period.

<TABLE>
<CAPTION>
UNITED
STATES INTERNATIONAL(1) TOTAL
--------- ---------------- ---------
<S> <C> <C> <C>
1997
Net sales............................ $485,334 $55,032 $540,366
Long-lived assets.................... 97,387 2,832 100,219
</TABLE>

<TABLE>
<CAPTION>
UNITED
STATES INTERNATIONAL(1) TOTAL
--------- ---------------- ---------
<S> <C> <C> <C>
1998
Net sales............................ $478,632 $43,588 $522,220
Long-lived assets.................... 90,175 2,432 92,607
</TABLE>

<TABLE>
<CAPTION>
UNITED
STATES INTERNATIONAL(1) TOTAL
--------- ---------------- ---------
<S> <C> <C> <C>
1999
Net sales............................ $463,027 $44,754 $507,781
Long-lived assets.................... 77,272 677 77,949
</TABLE>

<TABLE>
<CAPTION>
UNITED
STATES INTERNATIONAL(1) TOTAL
--------- ---------------- ---------
<S> <C> <C> <C>
39 WEEKS ENDED
MARCH 27, 1999
Net sales............................ $356,561 $32,941 $389,502
Long-lived assets.................... 79,447 867 80,314
</TABLE>

<TABLE>
<CAPTION>
UNITED
STATES INTERNATIONAL(1) TOTAL
--------- ---------------- ---------
<S> <C> <C> <C>
39 WEEKS ENDED
APRIL 1, 2000
Net sales............................ $383,441 $43,791 $427,232
Long-lived assets.................... 80,202 632 80,834
</TABLE>

Notes (1)--International sales reflect shipments to third party distributors
primarily in East Asia and sales from Coach operated retail stores in the United
Kingdom, Germany and Italy. The Germany stores were closed in the first quarter
and the Italian store was closed in the second quarter of 1999.

F-22
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND

THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

13.) RELATIONSHIP WITH SARA LEE

For the periods presented, intercompany transactions and balances between
Coach and Sara Lee consisted of the following:

<TABLE>
<CAPTION>
39 WEEKS
YEARS ENDED ENDED
-------------------------------- -----------
APRIL 1,
JUNE 28, JUNE 27, JULY 3, 2000
1997 1998 1999 (UNAUDITED)
--------- --------- -------- -----------
<S> <C> <C> <C> <C>
Payable (receivable) balance at
beginning of period............. $ 6,541 $ 8,300 $ 11,088 $(54,150)
Net cash transfers to Sara Lee.... (28,882) (25,209) (93,386) (57,844)
Allocation of corporate
costs(1)........................ 30,641 27,997 28,148 22,457
-------- -------- -------- --------
Payable (receivable) balance at
end of period................... $ 8,300 $ 11,088 $(54,150) $(89,537)
======== ======== ======== ========
Average balance during the
period.......................... $ 7,421 $ 9,694 $(21,531) $(71,843)
======== ======== ======== ========
</TABLE>

------------------------

Note (1)--Certain corporate costs are paid by Sara Lee and charged to Coach.
These items are recorded as expenses by Coach and recorded in the Payable
to/receivable from Sara Lee. These costs generally include business
insurance, medical insurance, employee benefit plan amounts, and income,
employment and other tax amounts. These amounts are charged to Coach based
upon actual Coach experience or specific identification of expense amounts.

Coach's costs and expenses include allocations from Sara Lee for certain
centralized treasury, real estate, accounting, auditing, tax, risk management,
human resources, and benefits administration. These allocations have been
determined on bases that Coach and Sara Lee considered to be reasonable
reflections of the utilization of services provided or the benefit received by
Coach. The allocation methods include relevant operating profit, fixed assets,
sales, tax benefits, or headcount. Allocated costs included in Selling, General
and Administrative expenses in the accompanying consolidated statements of
operations for the years ended 1997, 1998, and 1999 and the 39 weeks ended
March 27, 1999 and April 1, 2000 are $2,125, $935, $940, $641 and $658,
respectively.

For purposes of governing certain of the ongoing relationships between Coach
and Sara Lee at and after the separation date and to provide for an orderly
transition, Coach and Sara Lee have entered or will enter into various
agreements. A brief description of each of the intended agreements follows:

MASTER SEPARATION AGREEMENT

The Master Separation Agreement contains the key provisions relating to
Coach's separation from Sara Lee, the initial public offering of Coach and Sara
Lee's plans to complete the divestiture of Coach. The agreement lists the
documents and other items that must be delivered in order to accomplish the
transfer of assets and liabilities from Sara Lee to Coach. The agreement also
contains the conditions that must occur prior to the initial public offering and
contain certain

F-23
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND

THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

13.) RELATIONSHIP WITH SARA LEE (CONTINUED)
covenants and other agreements including covenants to exchange information,
engage in certain auditing practices, not take any action that would jeopardize
Sara Lee's ownership of over 80% of Coach's outstanding capital stock, maintain
confidentiality of certain information, preserve available legal privileges,
engage in certain environmental and safety practices and resolve disputes in a
particular manner.

GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT

The General Assignment and Assumption Agreement identifies the assets that
Sara Lee will transfer to Coach and the liabilities that Coach will assume from
Sara Lee in the separation. The agreement also describes when and how these
transfers and assumptions will occur. In general, the assets that will be
transferred and the liabilities that will be assumed are included on the
consolidated and combined balance sheet.

INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT

Effective as of the separation date, Coach and Sara Lee will each release
the other from any liabilities arising from events occurring on or before the
separation date, including events occurring in connection with the activities to
implement the separation and the initial public offering. The agreement also
contains provisions governing indemnification. In general, Coach will indemnify
Sara Lee against liabilities arising from the Coach business and Sara Lee will
indemnify Coach against liabilities arising from the Sara Lee business excluding
Coach. Coach will be covered under Sara Lee's insurance policies after the
initial public offering until such time that Coach is distributed.

REAL ESTATE MATTERS AGREEMENT

The Real Estate Matters Agreement addresses Coach's leased properties that
Sara Lee will transfer to Coach. Prior to creating Coach as a stand-alone
entity, all leased property was in the name of Sara Lee. The agreement describes
the manner in which Sara Lee will transfer the properties and its related
obligations to Coach. This agreement provides that Coach will accept the
assignment of all leases and will reasonably cooperate and take all steps with
Sara Lee to obtain landlord lease consents. This would include Coach using
commercially reasonable efforts to remove any Sara Lee guarantee, surety or
other security, and if required providing a guarantee, surety, indemnification
or other security to the landlord or Sara Lee. The Real Estate Matters Agreement
also provides that all reasonable costs required to effect the transfers,
including landlord consent fees, attorney fees and any other increased costs
will be paid by Coach.

MASTER TRANSITIONAL SERVICES AGREEMENT

The Master Transitional Services Agreement governs the specific services
that will be provided by Sara Lee to Coach. These services include certain
treasury, environmental, legal, accounting, tax, risk management and assessment
services, investor relations and internal audit coordination. The services will
be provided for a two-year period for a fee of $1.0 million per year, payable in

F-24
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND

THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

13.) RELATIONSHIP WITH SARA LEE (CONTINUED)
monthly installments. This agreement automatically terminates on the date Sara
Lee completes its divestiture of Coach. The charges are intended to recover the
direct and indirect costs of providing the services. The agreement provides for
a 10% increase in the cost beyond two years. The fee will be pro rated for the
actual term of the agreement if the agreement terminates in its entirety before
the end of its two year term. We may terminate the agreement with respect to any
service at any time upon notice to Sara Lee, however, the termination of any
service will have no effect upon the fee.

TAX SHARING AGREEMENT

The Tax Sharing Agreement governs how Coach and Sara Lee will report and
account for tax related matters. While Sara Lee owns greater than 80.0% of the
outstanding Coach stock, Coach will be included in the consolidated Sara Lee tax
return. The Tax Sharing Agreement specifies that Sara Lee will prepare and file
all income tax reporting on behalf of Coach prior to any final disposition of
Coach by Sara Lee. In this regard, Sara Lee will have the exclusive right to
determine the manner in which all tax returns will be prepared, methods of
accounting, tax positions and any elections that are made. Coach will reimburse
Sara Lee for the incremental tax costs of Coach's inclusion in the consolidated
tax return with Sara Lee. The total fee in the Master Transitional Services
Agreement includes the cost of these services from Sara Lee. Any tax related
disputes which arise between Coach and Sara Lee will be resolved through
specific dispute resolution provisions in the agreement.

EMPLOYEE MATTERS AGREEMENT

The Employee Matters Agreement allocates to Coach certain employee related
assets, liabilities, and responsibilities relating to Coach employees. Under the
agreement, Coach employees will be entitled to continue to participate in the
Sara Lee sponsored benefit plans, such as the pension and retirement plan,
health benefit program and group insurance plan, on terms comparable to those
for Sara Lee employees until the earlier of the dates that Sara Lee effects an
exchange or distribution of the Coach common stock.

14.) RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998 and June 1999, the Financial Accounting Standards Board issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and
SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133. These
statements outline the accounting treatment for all derivative activity. Coach
does not use derivative instruments and these accounting statements will not
have an effect on Coach.

F-25
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND

THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

14.) RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
discounts, coupons and rebates within the financial statements. The Emerging
Issues Task Force conclusions on this issue will become effective for reporting
periods beginning after May 18, 2000. Because of the timing of the release of
these conclusions, we have yet to fully assess their effect on the results of
operations and financial position. Based upon the available information it is
likely that the adoption of this statement will result in the reclassification
of various costs within the captions of the income statement. At this time, we
do not believe that the adoption of this statement would modify the pretax
earnings or net income presented in these statements.

15.) SUBSEQUENT EVENTS

BENEFIT PLANS

On April 27, 2000, Sara Lee approved a benefit and compensation program for
Coach that includes various short-term and long-term compensation arrangements
that will be implemented by Coach after the initial public offering.

The Coach 2000 Stock Incentive Plan will become effective upon the closing
of the initial public offering. The Coach Stock Incentive Plan permits the
granting of stock appreciation rights, stock options and stock grants in the
form of restricted stock or performance shares to employees. Concurrent with the
initial public offering, Coach is expected to grant at the initial public
offering price non-qualified stock options to selected members of management and
the board. These options will have a ten-year life and will vest ratably over a
three-year period. Certain Coach employees who hold Sara Lee stock options will
also be given the choice to convert their Sara Lee options into Coach options
using a conversion ratio of Coach's stock price to Sara Lee stock price, with a
conversion ratio floor of 1.00.

Also concurrent with the initial public offering, Coach will grant a
one-time stock option grant to substantially all full time employees. The
options granted will have a five-year life and will vest ratably over a
three-year period. The options will be granted at the initial public offering
price.

EQUITY RESTRUCTURING AND NOTE

Prior to the initial public offering, Coach will undergo an equity
restructuring which will result in $190 million of long-term debt to a
subsidiary of Sara Lee being recorded on the balance sheet of Coach with a
corresponding reduction in common stockholder's equity. Once recorded, the long-
term debt will accrue interest at U.S. dollar LIBOR plus 30 basis points while
Sara Lee owns greater than a majority of Coach's common stock, and U.S. dollar
LIBOR plus 250 basis points when Sara Lee owns less than a majority of Coach's
common stock. The debt will be paid from the entire initial public offering
proceeds and cash generated from operations. The debt will be guaranteed by
Coach and includes restrictions on additional secured debt and sale/leaseback
transactions, interest coverage ratios, covenants, and Sara Lee's right to
approve the Annual Budget of Coach.

F-26
<PAGE>
COACH, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 28, 1997, JUNE 27, 1998, JULY 3, 1999 AND

THE 39 WEEKS ENDED MARCH 27, 1999 (UNAUDITED) AND APRIL 1, 2000 (UNAUDITED)

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

16.) PRO FORMA BALANCE SHEET INFORMATION (UNAUDITED)

Pro forma as adjusted amounts give effect to the following actions as though
these actions had been taken as of April 1, 2000:

- Recording an equity restructuring which will result in $190 million of
long-term debt to a subsidiary of Sara Lee being recorded on the balance
sheet of Coach with a corresponding reduction in common stockholder's
equity;

- Capitalization of the receivable from Sara Lee in the amount of $89.5
million into Sara Lee's investment;

- Coach's sale of shares of common stock in the initial public offering
at an assumed initial public offering price of $ per share and
after deducting an assumed underwriting discount and estimated offering
expenses payable by Coach; and

- Use of the offering proceeds to repay a portion of the $190 million
long-term debt to a subsidiary of Sara Lee.

F-27
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.

-------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 6
Special Note Regarding Forward-
Looking Statements and Market
Data............................... 12
Our Separation from Sara Lee......... 13
Use of Proceeds...................... 14
Dividend Policy...................... 14
Capitalization....................... 15
Dilution............................. 16
Selected Consolidated Financial
Data............................... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 20
Business............................. 30
Management........................... 42
Arrangements between Sara Lee and
Coach.............................. 55
Principal Stockholder................ 63
Description of Capital Stock......... 64
Shares Eligible for Future Sale...... 70
Underwriting......................... 71
Legal Matters........................ 73
Experts.............................. 73
Where You Can Find More Information.. 73
Index to Financial Statements........ F-1
</TABLE>

-------------------

Through and including , 2000 (the 25(th) day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.

COACH, INC.

Common Stock

--------------

[LOGO]

--------------

GOLDMAN, SACHS & CO.

Representatives of the Underwriters

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts, other than the SEC
registration fee and the NASD filing fee, are estimates.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 36,960
NASD filing fee............................................. 14,500
New York Stock Exchange listing fee*........................
Printing and engraving expenses*............................
Legal fees and expenses*....................................
Accounting fees and expenses*...............................
Blue sky fees and expenses*.................................
Transfer agent and registrar fees and expenses*.............
Miscellaneous fees and expenses*............................
----------
Total*.................................................. $
==========
</TABLE>

------------------------

* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Maryland law permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as material to the cause of action. Our charter contains such a
provision which eliminates directors' and officers' liability to the maximum
extent permitted by Maryland law.

Our charter authorizes us and our bylaws obligate us, to the maximum extent
permitted by Maryland law, to indemnify any present or former director or
officer or any individual who has agreed to become a director or officer or who,
while a director or officer of the Company and at the request of the Company,
serves or has served another corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise as
a director, officer, partner or trustee from and against any claim or liability
to which that person may become subject or which that person may incur by reason
of his or her status as a present or former director or officer, or a person who
has agreed to become a director or officer, of the Company and to pay or
reimburse their reasonable expenses in advance of final disposition of a
proceeding. The charter and bylaws also permit the Company to indemnify and
advance expenses to any person who served a predecessor of the Company in any of
the capacities described above and any employee or agent of the Company or a
predecessor of the Company.

Maryland law requires a corporation (unless its charter provides otherwise,
which the Company's charter does not) to indemnify a director or officer who has
been successful in the defense of any proceeding to which he is made a party by
reason of his service in that capacity. Maryland law permits a corporation to
indemnify its present and former directors and officers, among others, against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by them in connection with any proceeding to which they may be made a
party by reason of their service in those or other capacities unless it is
established that (a) the act or omission of the director or officer was material
to the matter giving rise to the proceeding and (1) was committed in bad faith
or (2) was the result of active and deliberate dishonesty, (b) the director or
officer actually received an improper personal benefit in money, property or
services or (c) in the case of any criminal proceeding, the director or officer
had reasonable cause to believe that the act

II-1
<PAGE>
or omission was unlawful. However, under Maryland law, a Maryland corporation
may not indemnify for an adverse judgment in a suit by or in the right of the
corporation or for a judgment of liability on the basis that personal benefit
was improperly received, unless in either case a court orders indemnification
and then only for expenses. In addition, Maryland law permits a corporation to
advance reasonable expenses to a director or officer upon the corporation's
receipt of (a) a written affirmation by the director or officer of his good
faith belief that he has met the standard of conduct necessary for
indemnification by the corporation and (b) a written undertaking by him or on
his behalf to repay the amount paid or reimbursed by the corporation if it is
ultimately determined that the standard of conduct was not met.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

None.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS:

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
2.1* Form of Master Separation Agreement between Sara Lee and
Coach
2.2* Form of Tax Sharing Agreement between Sara Lee and Coach
2.3* Form of Master Assignment and Assumption Agreement between
Sara Lee and Coach
2.4* Form of Employee Matters Agreement between Sara Lee and
Coach
2.5* Form of Real Estate Matters Agreement between Sara Lee and
Coach
2.6* Form of Transitional Services Agreement between Sara Lee and
Coach
2.7* Form of Indemnification and Insurance Matters Agreement
between Sara Lee and Coach
3.1 Articles of Incorporation of Coach
3.2 Bylaws of Coach
4.1* Specimen Certificate for Common Stock
5.1* Opinion of Ballard Spahr Andrews & Ingersoll, LLP, special
counsel to Coach
10.1* Coach, Inc. 2000 Stock Incentive Plan
10.2* Coach, Inc. Employee Stock Purchase Plan
10.3* Coach, Inc. Executive Deferred Compensation Plan
10.4* Coach, Inc. Performance-Based Annual Incentive Plan
10.5* Coach, Inc. 2000 Non-Employee Director Stock Plan
10.6* Coach, Inc. Non-Employee Directors' Deferred Compensation
Plan
11.1* Statement Regarding Computation of Per Share Earnings
21.1 List of Subsidiaries of Coach
23.1 Consent of Arthur Andersen, LLP
23.2* Consent of Ballard Spahr Andrews & Ingersoll, LLP (included
in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>

------------------------

* To be filed by amendment.

II-2
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES:

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 28, 1997, JUNE 27, 1998 AND JULY 3, 1999
(IN THOUSANDS)

<TABLE>
<CAPTION>
PROVISION
CHARGED WRITE-
BALANCE AT TO COSTS OFFS (1)/ OTHER BALANCE
BEGINNING AND ALLOWANCE ADDITIONS AT END OF
OF YEAR EXPENSES TAKEN (DEDUCTIONS)(2) PERIOD
---------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JUNE 28, 1997
Allowances for bad debts.......... $ 3,483 $1,536 $(2,678) $ -- $ 2,341
Allowance for returns............. 4,055 -- -- 7,035 11,090
------- ------ ------- ------- -------
Total........................... $ 7,538 $1,536 $(2,678) $ 7,035 $13,431
======= ====== ======= ======= =======
FOR THE YEAR ENDED JUNE 27, 1998
Allowances for bad debts.......... $ 2,341 $2,304 $(2,927) $ -- $ 1,718
Allowance for returns............. 11,090 -- -- (3,848) 7,242
------- ------ ------- ------- -------
Total........................... $13,431 $2,304 $(2,927) $(3,848) $ 8,960
======= ====== ======= ======= =======
FOR THE YEAR ENDED JULY 3, 1999
Allowances for bad debts.......... $ 1,718 $ (171) $ (653) $ -- $ 894
Allowance for returns............. 7,242 -- -- (2,017) 5,225
------- ------ ------- ------- -------
Total........................... $ 8,960 $ (171) $ (653) $(2,017) $ 6,119
======= ====== ======= ======= =======
</TABLE>

------------------------

(1) Net of collections on accounts previously written off.

(2) Reflects adjustment to net sales for wholesale and direct to consumer
product returns, based upon historical experience.

All other schedules have been omitted because the information required to be
set forth in those schedules is not applicable or is shown in the consolidated
and combined financial statements or notes thereto.

II-3
<PAGE>
ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York City, State of
New York, on June 16, 2000.

<TABLE>
<S> <C> <C>
COACH, INC.

By: /s/ LEW FRANKFORT
-----------------------------------------
Name: Lew Frankfort
Title: Chairman and Chief Executive
Officer
</TABLE>

POWER OF ATTORNEY

We the undersigned directors and officers of Coach do hereby constitute and
appoint Keith Monda our true and lawful attorney-in-fact and agent, to do any
and all acts and things in our names and on our behalf in our capacities as
directors and officers and to execute any and all instruments for us and in our
name in the capacities indicated below, which said attorney and agent may deem
necessary or advisable to enable said Registrant to comply with the Securities
Act of 1933 and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the registration statements, or any
registration statement for this offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereof; and we do hereby ratify and
confirm all that said attorney and agent shall do our cause to be done by virtue
thereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on June 16, 2000:

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ LEW FRANKFORT
------------------------------------------- Chairman, Chief Executive Officer and Director
Lew Frankfort

/s/ KEITH MONDA
------------------------------------------- Executive Vice President, Chief Operating
Keith Monda Officer and Director

/s/ WAYNE SZYPULSKI Vice President--Corporate Controller of Sara
------------------------------------------- Lee (as principal financial officer and
Wayne Szypulski principal accounting officer for Coach)

/s/ GARY GROM
------------------------------------------- Director
Gary Grom

/s/ RICHARD OBERDORF
------------------------------------------- Director
Richard Oberdorf
</TABLE>

II-5
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
--------------------- -----------
<C> <S>
1.1* Form of Underwriting Agreement

2.1* Form of Master Separation Agreement between Sara Lee and
Coach

2.2* Form of Tax Sharing Agreement between Sara Lee and Coach

2.3* Form of Master Assignment and Assumption Agreement between
Sara Lee and Coach

2.4* Form of Employee Matters Agreement between Sara Lee and
Coach

2.5* Form of Real Estate Matters Agreement between Sara Lee and
Coach

2.6* Form of Transitional Services Agreement between Sara Lee and
Coach

2.7* Form of Indemnification and Insurance Matters Agreement
between Sara Lee and Coach

3.1 Articles of Incorporation of Coach

3.2 Bylaws of Coach

4.1* Specimen Certificate for Common Stock

5.1* Opinion of Ballard Spahr Andrews & Ingersoll, LLP, special
counsel to Coach

10.1* Coach, Inc. 2000 Stock Incentive Plan

10.2* Coach, Inc. Employee Stock Purchase Plan

10.3* Coach, Inc. Executive Deferred Compensation Plan

10.4* Coach, Inc. Performance-Based Annual Incentive Plan

10.5* Coach, Inc. 2000 Non-Employee Director Stock Plan

10.6* Coach, Inc. Non-Employee Directors' Deferred Compensation
Plan

11.1* Statement Regarding Computation of Per Share Earnings

21.1 List of Subsidiaries of Coach

23.1 Consent of Arthur Andersen, LLP

23.2* Consent of Ballard Spahr Andrews & Ingersoll, LLP (included
in Exhibit 5.1)

24.1 Power of Attorney (included on signature page)

27.1 Financial Data Schedule
</TABLE>

------------------------

* To be filed by amendment.