On Oct 31, 2013, we downgraded our recommendation on
) to Underperform from Neutral with a price target of $46.00.
Why the Downgrade?
Estimates for Coach have shown a downtrend since the company
reported first-quarter fiscal 2014 results on Oct 22, 2013. The
company disappointed on the sales front, which declined 1% to
$1,150.8 million, after increasing 6% during fourth-quarter
fiscal 2013, due to softness in the North American market. Net
sales also fell short of the Zacks Consensus Estimate of $1,191
Total North American sales fell 1% to $778 million.
Direct-to-consumer sales decreased 1%, while comparable-store
sales dropped 6.8%. Coach sells products that are discretionary
in nature, and in turn depends upon consumers' disposable
Fashion obsolescence remains the main concern for Coach's
business model, which involves a sustained focus on product and
design innovation. The company's pioneer position may be
compromised by delays in product launches. The company operates
in the highly competitive premium handbag and accessories
The bottom line also failed to impress investors, remaining
flat at 77 cents a share with the prior-year quarter and the
Zacks Consensus Estimate.
The softness in results triggered a downtrend in the Zacks
Consensus Estimate, as analysts become less constructive on the
stock's future performance. This is evident from the movement
witnessed in the Zacks Consensus Estimate that fell 9.2% to $3.46
for fiscal 2014 and 10.1% to $3.81 per share for fiscal 2015 in
the past 30 days.
Other Stocks that Warrant a Look
Not all retail stocks are performing as disappointingly as
Coach. Other stocks worth considering in the retail sector are
Brown Shoe Co. Inc.
), all sporting a Zacks Rank #2 (Buy).
BROWN SHOE CO (BWS): Free Stock Analysis
COACH INC (COH): Free Stock Analysis Report
HANESBRANDS INC (HBI): Free Stock Analysis
NIKE INC-B (NKE): Free Stock Analysis Report
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