Coach (NYSE: COH) skyrocketed earlier this week after announcing better-than-expected earnings; the stock is now up nearly 10% over the past week. The accessory and handbag company managed to post fiscal 3Q earnings results of $0.84 per share, up from $0.77 a year ago, and beating consensus of $0.81.
Question is, is luxury retail back in favor, or is this another head fake by Coach? Coach is notorious for rallying nicely, only to see its stock tumble shortly thereafter.
Coach's recent performance could be a sign of things to come, especially on the back of a rebounding economy. The company plans to drive long-term growth with expansion of its global distribution model and tapping under-penetrated markets. Coach generated 32% of 2012 sales from outside the U.S., while also having a solid balance sheet with little debt. The retailer ended last quarter with cash of $858 million and total long-term debt of $23 million.
Management did take a cautious stance for the second half of fiscal 2013, expecting high single-digit sales growth, with flat North America comp sales. However, margins are expected to remain above the competition, with the full-year gross margin to come in at 73% and operating margin projected to be 31%
Executive summary * Coach’s stock price has jumped by more than 15% after the release of its latest quarterly earnings. * We estimate Coach’s total sales to grow at 6-7% over our forecast period led by rapid sales growth in China and other countries (except Japan) coupled with single-digit growth in North America. * Coach looks fully valued based on our expected growth rates for its key businesses. Coach’s profits are also estimated to decline in the short term on account of increased SG&A expenses due to the acquisition of distributor businesses in international markets.
New York-based Coach, founded in 1941, once dominated the U.S. handbag market and has been a go-to brand for women in the aspirational luxury segment. But it has lost some of its luster as its target audience defected to flashier labels from outfits such as Michael Kors KORS -1.37% Holdings Ltd., Kate Spade, owned by Fifth & Pacific Cos., FNP -0.40% and Tory Burch. Increasing competition from these and other brands in recent quarters has cut into Coach's growth, especially in North America compared with competitors
Industry Structure and Competitor Analysis Michal kors
After the slowdown in the U.S. economy, luxury goods and apparels sales were largely hit as discretionary spending diminished. Now entering times of recovery, the leading trademarks in the segment seem poised to grow again and expand to new markets. On this occasion, we will look into Michael Kors Holdings (NYSE: KORS), Urban Outfitters (NASDAQ: URBN), andCoach (NYSE: COH) in order to understand the main reasons behind the expectations of recuperation.
A stock with margin growth
First in our list is luxury brand Coach, a pretty interesting case. Although the stock had been down for a few months, it has been showing considerable signs of recovery in the past days. After the announcement of stronger-than-expected third quarter results on April 22, the stock was up by almost 10% within a day and continued to escalate. However, the stock still offers a relatively low P/E ratio, since it trades at 15.27 times P/E, less than half the ratio offered by its main competitor, Michael Kors, which trades at 31.35 times P/E. This stock looks even cheaper compared to its peers, when its forward P/E of 13.8 times and PEG ratio of 1.4 are taken into account.
Several reasons lead me to believe that Coach is a good long-term investment. Coach is an established fashion (mainly handbag and accessories) brand, ranked by Forbes as the 51st most powerful brand in 2012. Its fame for high-quality products that compete with Louis Vuittonor Chanel attracts an oncoming public, willing to pay a premium for the company´s creations. Expansion of its worldwide distribution
the truths, as evidenced by the ESPN article. The message I gathered from the film was that anything is possible if you can work hard and accept change. The little town of Hickory was very set in its ways and uncooperative of the new basketball coach. Once the town and players learned to accept something different, the team flourished. The argument the film presents is to never count someone out. No matter how small a school or town is, hard work can trump talent and compete with the big boys…
INTRODUCTION Coach, Inc. is a designer, producer, and marketer of a prestige line of handbags, briefcases, luggage, and accessories. The company made its reputation selling sturdy leather purses in unchanging, traditional, classic styles, and it remains one of the best-known leather brands in the United States and has a growing reputation overseas. In addition to its main product line, the company offers Coach brand watches, footwear, and home and office furniture through agreements with licensing…
Your ALHS Mentor (if you’re enrolled through a school) or your ALHS Coach (if you’re enrolled outside of a school) will be an onsite resource to encourage your progress, discuss the course content, proctor your tests. Maintain open contact with your Mentor or Coach throughout the course. Set weekly meetings with your Mentor or Coach to keep you focused. Be sure you have contact information for your Teacher and your Mentor or Coach. Asking Questions Your ALHS Teacher will answer your content questions…
‘As someone who has hired coaches, been coached, now coaches others, and has run a viable business for the last two years, I can only say that I wish Aryanne had written her book sooner. While there are many business start-up texts, for the coach thinking of setting up on their own, this packs genuine, practical advice into every page and is likely to become a definitive reference. It will confront you with the truth about setting up on your own – and sometimes not pull any punches with that…
SUMMARY Coach, Inc is a marketer of fine accessories and gifts for women and men. The company is engaged in designing, wholesaling and retailing of handbags and accessories. Its product portfolio includes handbags, women’s and men’s accessories, footwear, jewelry, apparels, business cases, eyewear, and related products. Coach is involved in the sale related activities of its merchandise through factory stores and retail stores in the US and Canada. The company also sells its merchandise through…
Smith Materials, Ltd Ready Mix Operations Case Background and Overview - Confidential Business Background Initially acquired by the Smith family in 1960 to support its highway construction activities, Smith Materials Ltd. (SM) is a diverse construction materials company that operates in two separate business units (divisions). Cement Division SM’s Cement Division operates a cement plant and distribution facility in central Texas. The Cement Division produces approximately 1 million…
Memo To: From: Date: 10/01/14 Class: Management Policy Topic: Assessment of Coach What are the dominant economic characteristics of the luxury goods market? Does it appear that the industry’s prospects for growth and attractive profits are good? There are a couple of dominant economic characteristics when it comes to a luxury good. First off, any luxury good is going to have a very high elasticity within the market. The better the economy is doing will result in more sales in any luxury…
own groups and decide who was the most confident in the group, within the session I stayed clear of laissez faire. To be an effective coach and gain the respect and trust of the individuals, coaches need a range of different skills, including leadership and organisation, communication, teaching and motivation skills. For leadership and organisation skills a coach needs to be well organised personally, be able to organise and direct other people effectively, be able to organise equipment and facilities…
considered as an advantage because the company is not directly competing with the aforementioned rivals, due to the company’s uniqueness. Another advantage of this view is that the items sold at Vera Bradley are cheaper than Kate Spade, Michael Kors and Coach. The main thing for Vera Bradley would be the understanding of its role in the accessible luxury brand market without going further than where they can actually compete. The attempt to design and produce handbags for night life or fancy occasions…
to build on the knowledge they already had and make sense of new information in ways that really embedded the new learning. He suggested we learn best when new material is in the Zone of Proximal Development (ZPD) - not too easy, and just challenging enough that, with a little help from a more experienced person, we can master the material and shift our Zone upward. When I thought about this I realised this had been a model used widely for centuries to pass on skills and knowledge, from parent’s teaching…