It has been a time of change for the retail industry as many
companies have seen either great trading as of late, or extremely
sluggish reports and lowered guidance.
, a seller of accessories, definitely falls into the latter
category after its latest earnings report.
Coach in Focus
Although the company has been doing quite well from a long
term perspective, it has been far shakier as of late, as many are
starting to worry that the firm is being left in the dust by some
of its competitors. Thanks to this perception, the stock has been
quite volatile for much of 2013, though it has skewed lower lately.
This trend could continue based on the latest earnings, as though
COH managed to meet estimates, there were several key items in the
report that were concerning. In particular though, it was some
sluggishness from the all-important North American market that was
the most depressing for COH.
In this segment,
sales fell 1% to $778 million
, pushing comparable same store sales down 6.8%. Shipments also
fell, while department store sales compared to the year-ago period
also slumped, suggesting broad bearishness.
It wasn't all bad news as the company did see a strong performance
out of its international segment, and in particular Chinese sales.
This segment soared by 35% with a double-digit move higher in
comparable store sales figures.
So while Coach has made some good progress in the international
segment, it has seemingly come at the expense of its top market,
the U.S. consumer. Without this business, Coach will be in deep
trouble, and with declining margins on top of this story, it is
easy to see why many are growing concerned about COH.
Estimate Picture in Focus
Thanks to this dismal trend in the home market, analysts are
quickly reevaluating their opinion of Coach and their future
prospects on the earnings front. Literally every estimate made on
the company has moved lower in the past seven days, with more than
15 estimates moving south for all periods.
This has also pushed the company's consensus estimate sharply lower
as well, once again for all periods studied. The current year
estimate was especially horrendous, with it moving from $4.09/share
to $3.56/share today. And with this level, Coach is now expected to
see an earnings contraction for the current year, further
underscoring the bearishness on the stock.
Thanks to this, Coach has earned itself a dreaded Zacks Rank #5
(Strong Sell), suggesting that it is likely to underperform in the
near term. And with losses of nearly 10% in the past month alone,
this probably isn't the time to make a contrarian bet.
textile-apparel Zacks Industry
actually has a pretty poor Rank, pushing the segment into the
bottom 30% of all industries. However, there is one #1 Ranked stock
in the bunch which could be a great alternative;
This company has seen its Rank surge from a #3 a week ago to a #1
Rank today, and it is expected to see strong earnings growth as
well. So, if you are determined to stay in the industry, consider
this better positioned company over Coach at this time, at least
until COH can figure out how to grow sales once again in the key
North American market.
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