Good day, welcome to this Coach conference call. Today's call is being recorded. At this time, for opening remarks and introduction, I would like to turn the call over to the Global Head of Investor Relations and Corporate Communications at Coach, Andrea Shaw Resnick.
Good morning, thank you for joining us. With me today to discuss our quarterly and annual results are Victor Luis, Coach's Chief Executive Officer, and Jane Nielsen, Coach's CFO. Before we begin, we must point out that this conference call will involve certain forward-looking statements, including projections for our business in the current or future quarters or fiscal years. These statements are based upon a number of continuing assumptions. Future results may differ materially from our current expectations based upon a number of important factors, including risks and uncertainties such as expected economic trends or our ability to anticipate consumer preferences, control costs, successfully execute our transformation and operational efficiency initiatives and growth strategies, or our ability to achieve intended benefits, cost savings, and synergies from the Stuart Weitzman acquisition.
Please refer to our latest annual report on Form 10-K and our other filings with the Securities and Exchange Commission for a complete list of risks and important factors. Please note that historical trends may not be indicative of future performance. Also, certain financial information and metrics that will be discussed today will be presented on a non-GAAP basis. These non-GAAP measures exclude certain items related to our transformation plan, operational efficiency plan, and Stuart Weitzman acquisition-related charges, as well as the impact of foreign currency fluctuations where noted. The company's sales and earnings per diluted share results have also been presented both including and excluding the impact of the 53rd week in fiscal 2016. You may identify non-GAAP measures by the terms non-GAAP, constant currency, excluding the impact of foreign currency, or excluding the additional week.
The company believes that presenting these non-GAAP measures is useful to investors and others in evaluating the company's ongoing operations and financial results against historical performance, and in a manner that is consistent with the management's evaluation of the business. You may find the corresponding GAAP financial information or metric, as well as the related reconciliation on our website www.coach.com/investors, then viewing the earnings release posted today. Now let me outline the speakers and topics for this conference call. Victor Luis will provide an overall summary of our fourth fiscal quarter and full year 2016 results and will also discuss our progress on global initiatives across markets. Jane Nielsen will continue with details on financial and operational results and our outlook for FY17.
Following that, we will hold a question-and-answer session where we will be joined by Andre Cohen, President, North America and Global Marketing, and Todd Kahn, President and Chief Administrative Officer. This Q&A session will end shortly before 9:30 A.M. We will conclude with some brief summary remarks. I'd now like to introduce Victor Luis, Coach's CEO.
Good morning, Andrea, and welcome everyone. Good morning, everyone. Sorry for the technical difficulties we had there on the line. We will start with my remarks, then proceed to Jane, we will extend time at the end for Q&A. Again, apologies for the technical difficulties. I think we're up and running here again. Let me just first thank you, Andrea, again, and welcome everyone to our call. As noted in our press release, we are delighted with our strong fourth quarter performance, in which we achieved positive North America comps for the first time in over three years and drove increases across key financial metrics. These results cap a year where we returned the Coach brand to growth while elevating brand perception globally, thereby reaching an important milestone in the transformation journey we laid out over two years ago.
Indeed, I could not be more pleased with and proud of our team's execution of the transformation plan over the last two years, as we track to our goals in spite of the significant and unanticipated volatility in tourist spending flows, as well as the range of macroeconomic, geopolitical, and promotional headwinds. In the quarter, our North American direct businesses accelerated while we continued to implement strategic actions to elevate our positioning and streamline our distribution in the very promotional department store channel. Our international businesses continued to generate growth, highlighted by double-digit increases in Mainland China and Europe, as well as sales gains in our directly operated businesses in Southeast Asia. Most importantly, we achieved the expected inflection in profitability as we leveraged our expenses and the growth in our business.
Overall, our results give us confidence that the cumulative impact of our actions will continue to drive top and bottom-line growth as we enter the new fiscal year. Looking ahead for fiscal 2017, our strategic priorities for the Coach brand include re-energizing our brand and category by continuing to innovate and establish our unique modern luxury positioning. We will continue the brand's elevation through a fuller expression of Coach 1941 in stores and online while driving our men's business even further across all channels. In addition, we will focus on raising brand awareness and relevance globally through the rollout of flagships in key fashion capitals while continuing to renovate our existing store base. In marketing, we will continue to differentiate Coach through a combination of fashion and heritage, distorting investments to key regions and ensuring the message is relevant and increasingly aspirational for the broader market.
This will include the relaunch of Coach fragrance with our partner Interparfums starting this fall. For Stuart Weitzman, we will drive our leadership position in fashion boots during the key winter selling season, continue to diversify our offering outside of boots by developing iconic styles in pumps, sandals, and flats, drive global awareness and brand relevance through impactful marketing and the launch of New York and London flagships, and leverage our new leadership to bring the Stuart Weitzman brand into its next chapter of growth as a multi-category player. Now moving to our results. During the fourth quarter, as in the preceding quarters of fiscal year 2016, we delivered on our plan across businesses and geographies while continuing to successfully execute our brand transformation across the three key consumer touchpoints of product, stores, and marketing.
Most generally, we elevated our retail offering globally with the Coach 1941 assortment resonating in our retail stores and top-tier specialty stores, highlighted by iconic silhouettes such as the Saddle bag and Dinky, and new icons such as the Rogue. Also in retail, our Mickey collaboration, launched worldwide in June, was particularly well-received, driving significant brand interest and buzz. We continued to transition the fleet into our modern luxury concept, driving comp improvement. Finally, our heritage marking campaign focused on originality and authenticity highlighted Coach's key competitive differences, separating us from the landscape of both legacy European luxury and American accessible brands. We are also pleased by Stuart Weitzman's performance this quarter, which drove annual results for the brand exceeding our original estimates. During the quarter, we closed on the acquisition of the brand's Canadian distributor, including 14 retail stores, which transitioned to direct.
We also announced the appointment of Wendy Kahn as brand president and CEO, who will join Stuart Weitzman from Valentino next month, succeeding Wayne Kulkin, who will remain as a consultant supporting our corporate strategic agenda in footwear. Just today, Stuart Weitzman announced that Giovanni Morelli, currently leather goods Design Director of men's and women's non-apparel categories for Loewe, will be joining the brand next May, succeeding founder and Executive Chairman, Stuart Weitzman, who will become chairman at that time. Giovanni will be reporting to Wendy and brings to the brand a wealth of experience in accessories and footwear design, having worked extensively at Marc Jacobs, Chloé, and now Loewe. Giovanni's unique attention to detail, craft, and quality with his global modern sensibility will drive the Stuart Weitzman brand's leadership in footwear design while bringing his rich and varied experience in leather luxury goods to the brand's language.
Now, as has been our recent practice, I'd like to share some of the actions we've taken to build momentum across the three key brand pillars of product, stores, and marketing. Starting with product, where Coach is clearly emerging as a house of modern fashion design. During the fourth quarter, as in the first nine months of the year, virtually all of our retail channel assortment, both men's and women's, were Stuart Vevers' designs. It was the second quarter that included Coach 1941 and emphasized our elevation strategy. Overall, women's and retail was driven by leather goods and growth in 1941 silhouettes. In our fashion families, the Swagger comps the comp, growing in both sales and productivity. Mercer also contributed to results. We are now focused on two product lines for global retail. Coach New York, our broadest assortment, which includes essentials in our fashion families.
Coach 1941, our collection runway line, which includes our most elevated handbags as well as ready-to-wear footwear and other categories. Given success of the collection and consumers' embrace of higher price points, we expect to significantly expand it across our directly operated store network. By holiday, all of our retail stores will offer a range of 1941 handbags. The key retail strategies we are implementing include the continued elevation of the assortment with the further rebalancing between essentials, fashion families, and 1941. A move from 12 to 8 deliveries in our retail channel. First, to better align with the fashion calendar, notably with higher-end specialty retail, and also to drive improved productivity in each delivery. This will allow our families to work harder for us for longer.
We are also excited to launch our women's fragrance line with Interparfums the coming weeks and months across Coach retail stores, as well as in major department stores, specialty stores, and duty-free shops worldwide. The launch will be supported by an extensive integrated marketing and communications campaign, including television spots in September featuring Chloë Grace Moretz. In outlet, Q4 marked the introduction of a new Stuart designed silhouette in two sizes, the Harley, which is performing very well. In addition, Stuart introduced an expanded breadth of novelty prints and styles like the reversible totes and mini Bennett. These prints clearly signaled summer and delivered strong storytelling in our stores. Also in the fourth quarter, the consumer response to the men's product expansion to all outlet centers was exceptional.
While backpacks continued to be a top performer, we were especially pleased by the performance of men's novelty prints, which underscored that our men's customer is willing to invest in fashion pieces as well as modern classics. Looking ahead in outlet, you will also note a product and pricing architecture similar to retail. Starting with our value product, such as the reversible tote, essentials such as Phoebe, and fashion, including collaborations in sophisticated handbags such as Blake. Pinnacle product also continues to be very important as our most elevated offering with the highest amounts of novelty. In FY 2017, you will see some standalone disruptive outlet collaborations unique to this channel, such as Pac-Man this fall. Finally, men's is going to be a major focus in outlet, and we expect it to be over 20% of the business by the end of the fiscal year.
On stores, we're continuing to establish our modern luxury concept globally, renovating and opening approximately 165 during the quarter, including 45 renovations and one new modern luxury store in our directly operated North America business. In total, we renovated and opened about 300 modern luxury locations worldwide in FY 2016, taking us to just over 450 modern luxury locations globally across all channels. This is very much in line with our target to end the year with over 400 doors in the new format. Consistent with plan, these renovations have been driving significant inflections from previous trends and comps which exceed the balance of the fleet in the vast majority of stores around the world. We're especially excited about the ongoing positive comps we're driving in our renovated North America retail stores, including those stores that have now anniversaried their remodels.
Transforming our stores is more than just the physical design. It's the experience our store teams provide each and every single day. I am so proud that our mystery shopper scores, our key metrics that demonstrate how well we deliver our unique modern luxury experience, surpassed 80% this quarter. In addition, it's great to see how customers are responding to our new leather services, such as monogramming and leather conditioning, with new services to be introduced throughout 2017. In North American department stores, we renovated over 35 shop-in-shop locations to modern luxury in the fourth quarter. Finally, we have about 40 shop managers in place today and have seen a significant impact versus balance of doors. Separately, as noted in our release, one of our key strategic initiatives in the year ahead will be elevating the Coach brand in the North America wholesale channel.
Through Coach 1941, we have already started adding new locations in top-tier specialty in North America and globally. In FY 2017, we will also be rationalizing our department store distribution, taking our door count down by about 25%, or by over 250 locations, as well as reducing markdown allowances to the channel, given the high level of promotions. While we understand that consumers may use department stores for trial and shopping across brands, the high level of promotional impressions created negatively impact our long-term brand health while generating confusion across channels. As we look towards FY 2017, the last year of our heavy lifting phase, we will focus on renovating the balance of our targeted store base. By year-end, modern luxury doors will, in aggregate, represent the vast majority of our traffic.
We are very excited about our global flagship focus in FY 2017, stores which we view very much as key retail and marketing investments for the Coach brand. These flagships include our Coach House on Fifth Avenue and our Regent Street flagship, both opening in time for holiday. We are also excited to announce our first flagship in Italy, opening in Milan by the end of the calendar year on the prestigious Via Monte Napoleone. On the marketing front in the fourth quarter, Mickey was the big news, with a range of impactful and creative executions globally, generating over 950 million impressions. The launch created substantial buzz with both the most fashion-engaged fans and Coach-lapsed customers with our messaging of cool fashion and quality glove-tanned leather .
We remained focused on creating desire for our brand, amplifying our fashion positioning and our 75-year legacy of design innovation, craftsmanship, and quality. In FY 2017, we want to enhance brand perception and make the category exciting for her, with a singular message that cuts through Coach's unique modern luxury proposition, focusing on leathercraft and Stuart's vision of Coach New York cool, familiar Americana interpreted with a twist from New York's original house of leather design. We will leverage the opening of Coach House on Fifth Avenue as a global anchoring moment and will amplify regionally via openings on Regent Street in London, Via Monte Napoleone in Milan, and China World in Beijing. As a result of these efforts across all customer touch points, we're seeing continued progress with customers.
Importantly, in our North America brand tracking survey fielded in June, we saw strength in our overall brand affinities, while the percentage of customers who viewed Coach as ubiquitous declined versus a year ago. As our plans unfold and the momentum builds, we're delighted with our progress and proud of all that our team has accomplished to drive Coach's transformation. The Coach brand is very much on its way to evolving from a specialty retailer and accessories brand to a true house of fashion design, defining modern luxury. We're excited to see our creative vision and direction gain traction, and we'll continue to update you on these initiatives as we move forward. Turning now to a discussion on category trends. As we look ahead to FY 2017, there is no doubt that the challenges that existing today, affecting the category in specific and consumer spending in general, will persist.
The macroeconomic environment is uncertain, currency crosswinds are affecting tourist flows, and the recent geopolitical events and tragic terrorist attacks are negatively impacting sentiment. As a result, visibility into category growth is limited as the landscape continues to rapidly shift. This volatility was evidenced throughout FY 2016 and notably in the most recent quarter, as you've seen in some of the varied results already reported by several brands in our space. Overall, we estimate that the North American premium women's handbag and accessory market grew at a low single-digit in the June quarter, resulting in slight growth for the year. While men's growth was somewhat faster, given its relatively small penetration to the total, the premium men's and women's handbag and accessories category also grew at a low single-digit rate for the year. Coach's share of the combined market was 16% in FY 2016.
While Jane will provide additional details on sales and distribution by geography, we wanted to touch on some current trends and strategies by market, starting with North America. As you read in our release, for the quarter, our total Coach brand sales rose 9%, and our direct business 10% on a dollar basis and 11% in constant currency. Excluding the additional week, total North America sales rose 1%, reflecting the pullback in wholesale shipments, while direct sales rose 2%, driven by the 2% increase in comparable store sales on a 13-week versus 13-week basis. Comp trends in both retail and outlet stores accelerated, while the internet contributed approximately one percentage point to aggregate comp this quarter. Overall, our aggregate comp was up 2%, led, as expected, by retail, while outlet comp was essentially flat.
Higher ticket drove overall comp, while very slight changes in traffic and conversion netted to a flat overall number of transactions. We are especially pleased by the results we are seeing on coach.com, with our fashion launches and unique collaborations such as Mickey, pointing to increased engagement with the most fashion-engaged online customers. Most importantly, the fourth quarter marked a return to positive North America comp for the first time since the third quarter of 2013 and the seventh sequential improvement since our transformation began two years ago, representing a 26% comp swing since the first quarter of FY 2015. Turning to our retail performance and the metrics we traditionally share on products. The above $400 price bracket rose in penetration, saw another positive comp on a sales and unit basis, and represented about 40% of handbag sales, up from about 30% last year.
As planned, and as discussed back in April, we de-emphasized the entry price gifting assortment since coming out of holiday and therefore, saw a decline in the $300 and below handbag price segment. Turning to event marketing. In FY 2016, we continued to evolve and optimize our events with the goal of further reducing the number of days on promotion. Exiting this year, we are comfortable with the cadence and type of events we're hosting and don't expect a significant change in the year ahead. Naturally, there may be some tweaks to the dates, type, or duration, but the overall days should be fairly stable with our first preferred customer event for September anniversarying the prior year. Now moving on to international. In the fourth quarter, international Coach brand sales rose 15% on a reported basis and 13% on a constant currency basis.
For the year, Coach brand international sales increased 5% in USD and 9% in constant currency. As noted in our release, the additional week of sales in FY 2016 added approximately $32 million to overall international segment sales. Excluding the additional week, fourth quarter sales rose 6% in USD and 5% in constant currency, while full-year sales increased 3% in USD and 7% in constant currency. Turning to details by geography. Please note the comments I'll make will be on the 13-week and 52-week basis. Greater China sales increased 5% in USD in the quarter, with double-digit growth and positive comparable store sales on the mainland, offset in part by continued weakness in Hong Kong and Macau. On a constant currency basis, sales increased 10%.
For the year, sales increased 2% in USD and 5% in constant currency to approximately $605 million, slightly ahead of our most recent guidance of approximately $600 million, despite a further devaluation in the CNY since our last earnings call. Notably, our constant currency sales growth for the year was consistent with our original expectations provided last August, despite the evolving macroeconomic environment and tourist spending flows, as well as sustained softness in Hong Kong and Macau. Importantly, and despite near-term volatility, we remain optimistic on the prospects for this market over the long term, as the drivers we've consistently mentioned are more relevant than ever and as our China team continues to do an excellent job of building our brand equity in that market. It's important to note that we still see the Chinese consumer as an increasing part of our total business.
During the fourth quarter, our global business with the Chinese continued to grow. In addition to strong domestic spending, we experienced growth in other key destinations, including Southeast Asia. This growth was partially offset by declines in travel flows into North America and Europe, notably France, along with continued softness in Hong Kong and Macau. In addition, and as expected, we also saw a decline in Chinese tourist flows into Japan, impacted by currency fluctuations and the anniversary of the dramatic increase in Chinese tourists last spring. To that end, in the fourth quarter, Japan sales were down 5% on a constant currency basis, but rose 7% on a USD basis, reflecting the stronger JPY.
For the year, sales rose 2% in constant currency and were essentially even with the prior year in dollars, benefiting overall from an increase in PRC tourist flows on an annual basis and a positive response to our new modern luxury positioning from Japanese consumers and tourists alike. In Europe, our brand continues to grow rapidly through new directly operated stores, wholesale locations, and comps. Our overarching focus is to build brand awareness with both domestic consumers as well as tourists. In the fourth quarter, our business grew at a double-digit pace, driven by both distribution and comparable store sales. We experienced relative softness in France in the quarter, impacted by weak tourist traffic, as mentioned. Overall, and despite these headwinds, our sales rose 50% to $135 million in fiscal 2016 and exceeded our guidance of $125 million.
Over our planning horizon, our goal is to achieve over a half billion dollars in sales at retail, representing a mid-single-digit share of the premium women's and men's bag and accessories market. In our other directly operated Asian markets outside of China and Japan, namely South Korea, Taiwan, Singapore, and Malaysia, sales growth in the fourth quarter was solid across the entire region in local currency and rose at a low single-digit rate in dollars. For the year, sales increased high single digits in constant currency, declined slightly in dollars. Here too, we remain focused on driving productivity through our transformation initiatives. Finally, I would point out that we're seeing disparate results in our international wholesale businesses, which, while small, are important to growing brand awareness.
For the quarter, our overall sales at POS increased modestly, driven by strong growth in those distributor-operated locations focused on the domestic consumer, while travel retail was relatively weak due to the volatility of tourist spending flows globally. On a net sales basis, revenue was down in the quarter due to shipment timing. For the year, both POS and net sales declined slightly as softness in travel retail offset growth in distributor-run locations targeting domestic customers. In closing, we are encouraged with the momentum of our business and proud of the progress we've made along our transformation journey, elevating the perception of the Coach brand and Coach, Inc. as we've earned increasing acceptance as a house of modern luxury brands. Before handing over to Jane for details of our financial results and guidance for fiscal 2017, I would like to touch on our CFO transition.
As you know, we announced Jane Nielsen's departure in June, which will become effective later this month following the filing of our 10-K. This will be Jane's last earnings call with Coach. Jane has played an important role as a terrific partner to me and the Coach executive team as we have executed our brand transformation. I speak for the entire team in thanking her and in wishing her every success in her future. At the same time, I could not be prouder of the bench that we have across finance, and especially the leadership role that Andrea Shaw Resnick will play as our interim CFO until we appoint a permanent successor. You all know Andrea well. She's been an important partner to me and our business in crafting and the communication of our strategies and will ensure we don't miss a beat in their execution.
I would now like to pass on to Jane. Jane?
Thank you, Victor, for those kind words and for the privilege of working at this outstanding company. Victor has just taken you through the highlights and strategies. Let me now take you through some of the important financial details. Please note the comments I'm about to make are based on non-GAAP results. Corresponding GAAP results, as well as the related reconciliation, can be found in the earnings release posted on our website today. We are extremely pleased with our performance in the fourth quarter as we drove increases across the key metrics of sales, operating profits, and earnings. We achieved positive comps in North America while continuing to grow our business internationally. We leveraged this growth with significant improvement in our operating margin for the quarter. The strong fourth quarter capped a year of important financial milestones.
In fiscal 2016, we generated overall top-line growth for Coach, Inc. while tightly controlling our inventory. We drove a sequential improvement in our North America comps throughout the year, while achieving our revenue targets for Europe and Greater China against a volatile macro backdrop. We continued to invest in our brands while delivering our margin targets for FY 2016, ending the year with an operating margin of over 17%, in line with guidance of high teens, including a Coach brand gross margin slightly above prior year, excluding the impact of currency. In addition, we successfully integrated the Stuart Weitzman business, which outperformed our original revenue and earnings per share projections for the year. Turning now to the details.
Before I begin, please note that the results for the fourth quarter and fiscal year 2016 included 14 and 53 weeks respectively, while the same periods in fiscal 2015 included 13 and 52 weeks respectively. The 53rd week contributed $84 million to 2016 fourth quarter and fiscal year sales, including $77 million in Coach brand revenue and $7 million associated with Stuart Weitzman. The additional week added $0.07 to earnings per diluted share. The following discussion of performance for the fourth quarter and fiscal year 2016 includes the 53rd week. Focusing on Coach, Inc. Net sales totaled $1.15 billion for the fourth fiscal quarter, an increase of 15% on both a reported and constant currency basis. For the year, net sales totaled $4.49 billion, an increase of 7% on a reported basis and 9% on a constant currency basis from fiscal 2015.
Gross profit in the fourth quarter totaled $783 million, an increase of 13%, while gross margin for the quarter was 67.8% compared to 69.0% last year. Gross profit for the year totaled $3.05 billion, an increase of 5%, while gross margin was 68.0% compared to 69.6% in FY 2015. SG&A expenses totaled $608 million in Q4, an increase of 7% or 52.7% of sales as compared to $566 million or 56.4% in the year ago period. For the year, SG&A expenses were $2.28 billion, an increase of 7%, and represented 50.7% of sales as compared with 50.8% a year ago. Operating income for the quarter was $175 million, an increase of 39%, while operating margin was 15.1% versus 12.6%. Operating income totaled $777 million in FY 2016, a decrease of 2%, while operating margin was 17.3% versus 18.8% a year ago.
Net interest expense was $7 million in the quarter as compared to $6 million in the year ago period. Net interest expense was $27 million in FY 2016 as compared to $6 million in FY 2015. Net income for the quarter totaled $126 million compared to $85 million a year ago, with earnings per diluted share of $0.45, up 47% versus prior year. Net income for the full year totaled $552 million, an increase of 4%, with earnings per diluted share of $1.98, including a $0.12 contribution from Stuart Weitzman. Moving to global distribution. In total, we closed 11 net Coach brand locations globally in the fourth quarter to end the year with 954 directly operated locations worldwide. In addition, we finished FY 2016 with 75 directly operated Stuart Weitzman stores, including 14 locations associated with the acquisition of the Canadian distributor, which closed in the fourth quarter.
Overall, consistent with our plan, our global Coach brand directly operated square footage rose low single digits for the year, with North America square footage essentially even with prior year and international up mid single digits. In FY 2017, we expect our Coach brand directly operated square footage to be up low single digits globally. This guidance assumes that Coach brand directly operated square footage in North America will decline slightly with continued net store closures. Internationally, we expect distribution growth to again be led by Europe, where we are planning another year of significant square footage growth driven by new stores, including our flagship on Regent Street. In Greater China, we are projecting a mid-single digit increase in square footage driven by net new store openings on the mainland, partially offset by a modest decline in units in Hong Kong and Macau.
In our directly operated businesses in Southeast Asia, we expect little change in both units and square footage, while in Japan, we are planning for additional store closures resulting in a mid-single digit decline in square footage. Closing with Stuart Weitzman distribution, we expect 5-10 net new directly operated locations in FY 2017. Moving on. Inventory levels at the quarter end were $459 million compared to ending inventory of $485 million a year ago, a decrease of 5%. Net cash from operating activities in the fourth quarter was $249 million, compared to $186 million last year. Free cash flow in the quarter was an inflow of $129 million, versus $111 million in the same period last year. Our CapEx spending was $120 million versus $75 million. For the full fiscal year 2016, net cash from operating activities was $759 million, compared to $937 million a year ago.
Free cash flow in the fiscal year 2016 was an inflow of $362 million, versus $738 million in the fiscal year 2015. CapEx spending totaled $396 million for the year, including approximately $145 million of CapEx associated with the new headquarters, compared to total CapEx of $199 million in FY 2015. At the end of the fiscal year, cash and short-term investments stood at $1.3 billion as compared to $1.5 billion a year ago, and our total borrowings outstanding were approximately $900 million at the end of the fiscal quarter. Turning to Hudson Yards and a discussion of our capital allocation policy. Last week, we completed the sale of our interest in 10 Hudson Yards in New York City, resulting in a gain of approximately $30 million. At the same time, we entered into a 20-year lease for the headquarters space at approximately $65 a square foot for the first five years.
This transaction is leverage neutral and increases the flexibility of our balance sheet, while at the same time securing a long-term lease for our company with minimal net impact to our P&L. As planned, following the sale, we paid down approximately $300 million of our term loan with no prepayment penalty. In addition, we will receive net proceeds of approximately $125 million later this fiscal year related to the sale of our previous headquarters buildings on 34th Street. We should receive the proceeds within 45 days of vacating the buildings and therefore expect receipt during or by the end of the second fiscal quarter. Overall, we are very pleased to monetize our investment in Hudson Yards, where our commitment was key to kicking off the project.
Our new headquarters brings both our brands, Coach and Stuart Weitzman, together under one roof in a modern workspace, very much reflective of Coach values and sensibility. The transaction was long planned for, and there is no resulting change in our capital allocation policy. Our first priority is to continue to invest in our business as we have a compelling opportunity to drive sustainable growth and value creation, and we're putting our capital against this opportunity. Our second priority, strategic acquisitions, is also about growth. While we have nothing planned imminently, we want to have the flexibility to act if and when it's in the best interest of Coach and our shareholders. And third, capital returns. As I've stated before, we are committed to our dividend and expect our dividend to grow at least in line with the prior year's operational net income growth as our transformation gains momentum.
To this end, as noted in our press release, the board declared a quarterly cash dividend of $0.3375 per common share, payable in early October, maintaining our annual rate of $1.35. Underpinning all of these priorities are our guardrails for allocating capital effectively, maintaining strategic flexibility, strong liquidity, and access to the capital markets. Now turning to our outlook for fiscal 2017 on a non-GAAP 52-week versus 52-week basis. We expect total revenues for Coach, Inc. in fiscal 2017 to increase by low to mid single digits, including the expected benefit from foreign currency of approximately 100 to 150 basis points based on current foreign exchange rates. This continues to assume a positive low single-digit comp for the Coach brand in North America for the year. In addition, we are initiating an operating margin forecast for Coach, Inc. of between 18.5% and 19% for fiscal 2017.
This guidance incorporates the negative impact of both Stuart Weitzman and the strategic decision to elevate the Coach brand's positioning in the North America wholesale channel, including the closure of about 25% of doors and a reduction in markdown allowances. Excluding this impact, Coach brand operating margin would be in the area of 20% for fiscal 2017, consistent with prior guidance. Interest expense is expected to be in the area of $25 million for the year, which incorporates the benefit associated with the paydown of the term loan as announced. The full year fiscal 2017 tax rate is projected to be about 28%. We expect our weighted average diluted shares outstanding for the year to be in the area of 283 million. Taken together, we are projecting double-digit growth in both net income and earnings per diluted share for the year.
We expect CapEx for Coach to be in the area of $325 million in FY17. In closing, we are very pleased with our progress to date. We have a clear strategy and a well-articulated implementation plan for FY17, building on the successes we have achieved in our first two years of transformation. Importantly, we expect FY17 to be the year when we return to growth across all financials, leveraging top-line growth and supported by our operational efficiency initiatives, which have allowed us to become a more nimble organization. Overall, the strength of our brands, the clarity of our vision, and the dedication and proven execution capabilities of our team gives us continued confidence in our ability to drive sustainable and profitable growth for Coach over the long term. I'd now like to open it up to Q&A.
Thank you. We will now begin the question and answer session. Our first question comes from Ike Boruchow. Your line is now open.
Hi, everyone. Thanks for taking my question. Congrats on the return to positive comps.
Thanks, Ike.
I guess, on North America, given you stated that, I think you said the North America outlet comp was essentially flat in the quarter, which I don't think a lot of people expected, given what some other brands have said about tourism and traffic the past quarter or so. I just wanted to ask, what are you assuming is the run rate of that channel for you guys in North America going forward? Then just a quick one on top of that, given the timing of initiatives and multi-year compares and the choppy environment, should we assume much, if any, North America comp variability or volatility by quarter or by half this year? Thank you very much.
Thanks, Ike. I'll let Andre answer that for you.
Morning. First, we're really pleased with the sequential improvement we've seen in the outlet channel over the last several quarters. It remains a very productive, important channel for Coach, as you know. For FY 2017 going forward, we're really looking at comps and outlet being sort of either side of flat. Over time, as conditions in the market improve, we're hoping to be able to reduce our promotional stance in that channel. As to your second question, we're expecting comps to basically be positive across all quarters for FY 2017.
Perfect. Thank you.
Ike, in terms of your comments on tourists, we have not seen a dramatic shift quarter to quarter. In fact, what we have seen is a slight decrease in Chinese, which has been made up by increases in our Japanese and Korean tourists here in the U.S. Overall, global flows have remained pretty consistent to the trends that we have seen in the past. France being negatively impacted, of course, by terrorist attacks, continued softness in Hong Kong and Macau, and now Japan anniversarying, of course, the massive increase last year of PRC tourists. Southeast Asia continues to see tremendous benefits from PRC tourists.
Got it. Thanks. Congrats again.
Thank you.
Our next question comes from Erinn Murphy. Your line is now open.
Great, thanks. Good morning. I was hoping maybe you could dig in a little bit more about the decision to exit 25% of your North American wholesale doors. How should we be thinking about effectively the sales and the margin impact from the strategic pullback as we look at your FY 2017 guide?
Morning, Erinn. Jane?
Yeah. Erinn, as you think about 2017, essentially, our guidance for the Coach brand is essentially unchanged, except for the impact of North America wholesale. When you think about that, we expect that impact to be about a point to sales growth, most notably in Q1. It flows through. Obviously, it's a high operating margin channel and will flow through to our operating margin. The most significant impact will be in Q1.
Okay. Jane, I guess for you, how should we think about gross margin for Coach, Inc. for the full year, given that change as well?
Yeah. You'll see Coach brand gross margin maintain that 69%-70% range that we guided to two years ago.
Okay. If I could just sneak in one more for Victor, just on pricing architecture. You guys have obviously seen a very nice response to the 1941 collection. Could you share with us what type of consumer you're seeing in terms of the trade-up? Is it the lapsed consumer? Is it a new consumer? On a full-year basis, just how should we think about the product mix in terms of those buckets that you break out under $300, $300-$400, and $400 plus? Thank you.
Sure. We're seeing both current Coach fans engaging well with 1941 lapsed consumers, especially pleased with what we're seeing online, Erinn, as we're getting a younger consumer that maybe has not engaged with Coach and is much more fashion engaged through coach.com, engaging with newness as well. That's especially true at the beginning of the fashion seasons or during special launches such as we've just experienced with Mickey. That is the case, of course, in most of our mature markets. Quite different, of course, in developing markets like Europe, where we're starting with 1941 as the true first impression that these consumers have of Coach in an increasing way. In terms of how we see the balance, we discussed in our prepared remarks the balancing of the assortments between, if you will, the essentials, fashion, and 1941.
We are increasing the presence of 1941 to the whole network, as I discussed. I think that during gifting periods, as has been the case in the past, you will see us, of course, increase that assortment with lower price points, taking a larger share of the mix, which would be our plan for this holiday as well. Overall, I think you're going to see us continue to see how high is high as consumers engage incredibly well with the message that we're putting out there and understand both the quality of what 1941 represents, but also the fashion messaging.
Thank you, and congratulations.
Thank you.
Great. Just a reminder, we will only allow one question per participant. Thank you. Our next question comes from Anna Andreeva. Your line is now open.
Great. Thanks so much. Good morning, congrats to the team.
Thank you.
Good morning.
I guess two questions. First, with all the volatility out there, what kind of category results in North America are you guys embedding either here in the first quarter or for the year? Secondly, a question on e-commerce. Now that EOS impact has been lapped and e-commerce is contributing again, remind us about the size of this business. Is profitability higher versus corporate average, and how big do you think this business could ultimately get? Thanks.
Okay. I'll let Andre Cohen discuss e-commerce in a bit. In terms of the category, per our remarks, just given the uncertainty and what's happening in both the macro and geopolitical environment, the trends on tourists, we see that it is difficult to plan an acceleration in the overall category, of course, in the short term. In fact, there are, just as we had two years ago, very specific actions in the pullback of our EOS, which led to some impact on total category growth. I know that many of you are aware that some of our competitors are discussing similar actions at the moment, which will also impact category growth, especially here in North America. I would just add that in terms of our own guidance, we've built it bottoms up.
It's based on our views on our own distribution growth, our own comp expectations by market and by region, driven by, as well, our own innovation across product stores and marketing and what we expect for the Coach brand. Andre Cohen, on web.
Yes, the web performed really well. It generated about one point of our two points of overall comp growth. Both web channels, full price and EOS, performed well. We're seeing, I think as we've mentioned earlier, a really much more fashion-engaged consumer engage with the web, particularly when we've got more elevated product novelty and some of these collaborations like we saw with Mickey. We see that business continuing to grow in line with the balance of Coach going forward, at least in line, I'd say.
Yeah, its profitability gross margin is about in line with the rest of the business, but the operating expenses are obviously advantaged to give it a higher operating income level.
Terrific. Thanks, best of luck.
Thank you.
Thank you.
Okay. Once again, just a reminder, participants, please limit to one question only. Thank you. Our next question comes from Oliver Chen. Your line is now open.
Hi. Congrats on solid results. Jane, also best regards. We'll miss you.
Thanks.
Victor, on your comments about going from 8 to 12, could you brief us on how that will manifest in terms of which collections do you think will benefit from this increased flow, how do you just ensure that the store continues to look integrated and tell the right story in terms of the customer reception to that flow? On the decision on department stores, it'd be great if you could just brief us on the strategic rationale and how you'll evaluate making sure that the ones that you're exiting are the right ones for the brand at large. It is a category where certain customers still have a lot of loyalty to that channel. I just want to make sure I understand why that was the right time. Thank you.
Thank you, Oliver. First, on the product flow, you mentioned 8 to 12. We mentioned in our notes going from 12 to 8, we think, of course, that's what you meant, the 12 to 8 flow. Which is for-
Yes
It's important to note, for full price only. In our outlet channel, we continue to drive monthly newness with monthly flows. In our full price channel, we're moving from 12 to 8. The reasons there are two, as I mentioned in my prepared remarks. We're really wanting to align much more closely with the fashion calendar as we engage increasingly with top-tier specialty and tier 1 department stores across the world. Wanting to have our launches be much more impactful as we put much more marketing muscle behind them. The perfect example of that could be a collection such as Mickey, which in the case of Japan, is today still very much being rolled out through special events with key department stores in that market.
It's really about having the newness, such as Rogue and other 1941 bits of the assortment, play a more important role for a slightly longer period of time and therefore drive more efficiency. On wholesale, Andre?
Yes. In terms of department stores, look, they remain a critical part of our brand building in North America. It's an important channel for Coach. We do want that channel to treat the brand in a way that's consistent with the way we're doing it in our own retail distribution, direct distribution. We're basically exiting, one, lower volume doors, so doors that are below a certain threshold of volume and where we're no longer seeing a Coach consumer shopping. Second, it's a channel that's become very promotional over the last few quarters, as you know. We have decided that we no longer support markdown allowances to the level we did in the past.
That's going to naturally exclude us from a number of events in that channel, and it'll help to return the brand to health along all of its touch points, not just our direct operated distribution.
Yeah. Oliver, I would hate for anyone to believe that we don't have belief, if you will, in the wholesale channel. We have terrific relationships with all of our partners. This is very much a surgical move that is meant to drive the long-term sustainable health of our brand. We also want to avoid, as I said in my prepared remarks and as Andre has reiterated, that confusion between channels. A very important move for us.
Thanks. The elevation looks great. Best regards.
Thank you.
Thank you, Oliver.
Our next question comes from Randy Konik. Your line is now open.
Great. Thanks. Just want to follow up on the comments around Coach 1941 expansion into all stores. Can you give us more specific color on what you mean by presence? What kind of SKU count should we expect in the stores, and how do you think about the presentation aspects of it and the marketing aspects around the product? Get some color on how we should expect things to progress there. Back on the greater than $400 penetration question, I think was asked earlier. Is there any specific threshold where you would see we should get towards a goal of maybe 50% of the mixes are greater than 400 and that would be it? How should we be thinking about what is the optimal mix from a price point perspective in the assortment? Thanks.
In terms of Coach 1941, what we're taking to a full store distribution in North America is handbags. We'll have about 20 SKUs of handbags. Actually, it's already happened in the last week that have hit all the stores. Basically these are bags that go from Dinky at $300 to Rogue at $800 above. We're not taking our ready-to-wear to full distribution at this point. It's a key piece of our brand building. Coach 1941 resonated very strongly with all levels of distribution it's been put in, and we felt we needed to have a consistent expression of the more elevated brand across the entire fleet in the U.S. and Canada.
Yeah. In terms of a specific target, I would say that we really don't have one. The consumer's going to help us decide that, and it's going to have a very different face seasonally, as I mentioned earlier. During holiday, we'll have obviously gifting play a more important role in the assortment, and therefore we would expect AURs to be lower. During seasonal launches, especially at the beginning of each fashion season, as we enter increasingly with Coach 1941 into a fashion cycle, you'll see that during periods like March, April, September, October, November, you will have higher AURs play a more important role as the fashion launches play a more important part of our mix.
Our next question comes from Michael Binetti. Your line is now open.
Morning, Michael.
Operator, would you move on to the next, please?
Yes. Our next question comes from Christian Buss. Your line is now open.
Morning, Christian.
Yes. Hello. Good morning. I was wondering if you could talk a little bit about the cost disciplines that you're implementing. Where is the progress there, and have you found any incremental areas as you look towards fiscal 2017 and 2018?
We continue to execute against the operational efficiency plan that we outlined in the last quarter, where we focus on becoming a more nimble, agile, less layered organization. We've made progress against that goal. You saw it show up in our fourth quarter operating margin as we leveraged top-line sales to expand our operating margin, and that is incorporated into our FY 2017 guidance.
Our last question comes from Dana Telsey. Your line is now open.
Good morning, everyone. Nice to see the return to positive comps. Congratulations.
Thanks, Dana.
As you think about Stuart Weitzman and its contribution this past year, how do you look at Stuart Weitzman in fiscal 2017 and its contribution? Just lastly, the 1941 collection gaining more prominence. What % of the SKU should it account for, and is it a higher margin than the core? Thank you.
In terms of Stuart Weitzman, I'll let Andre touch on here in North America, specifically 1941. I think we answered part of that question earlier, Dana. In terms of Stuart Weitzman, we expect it to grow double digits, which is in line with previous guidance. Of course, it'll be aided by the take-back of the Canada distribution, those 14 direct stores that we touched upon in our prepared remarks. I'm especially excited about everything we're learning about that brand, how it's resonating, the strength of its supply chain, the strength of its international and growing consumer profile, and most importantly, by the wonderful new talents that we're also bringing in that will help this brand over the medium to long term evolve into a broader luxury brand with a strength for sure to come in handbags and accessories as well.
In terms of the question on 1941, I'll let Andre just touch on that for you.
It varies by tier of distribution. Obviously, in our top tier, it's probably about a third of the assortment and down to about a quarter in our more entry-level stores. That's an evolution. We'll get there over the next couple of quarters.
Dana, as you think about Stuart Weitzman, especially in the coming year, we do expect a low double-digit growth rate. There is a fair amount of volatility in both sales and profit as you move through the year, given the high mix of its penetration into wholesale.
Thank you.
Thank you. That will conclude the Q&A portion of our call. I'll now turn it back over to Victor Luis for some concluding remarks. Victor?
Let me first thank you, Andrea, and thank you, Jane, for all of your contributions. I want to close by just congratulating all of our global teams, both in the Coach and Stuart Weitzman brands, for their hard work and dedication in driving not only the development of our brands, but of course, our business during what has been a very volatile year in the broader environment. I also want to thank all of you on the phone who've been following us, especially over the last 24 months, and have seen the continued unfolding and realization of our creative and business vision.
While there's a tremendous amount of uncertainty in the global environment and the category in the short term, I remain incredibly optimistic about the long-term opportunities in our categories, not only handbags, but increasingly footwear and outerwear in both developed and developing markets and the prospects that exist for the world's middle classes. Most of all, I have tremendous faith in our teams and our brands as we define a new vision for luxury that is based on quality, craftsmanship, and a modern fashion sensibility that is both approachable, optimistic, and inclusive, and represents the best of our New York and American values that resonates so well across the world. Thank you all.
This does conclude the Coach earnings conference. We thank you for your participation. You may now disconnect.