We maintain our Underperform recommendation on
), the maker of handbags, wallets, shoes and other accessories,
with a target price of $44.00. Our bearish stance on the stock is
also supported by its Zacks Rank #5 (Strong Sell). So far in the
year, the stock has dipped 13.6%.
Why the Reiteration?
Coach sells products that are largely discretionary in nature
and thereby depend upon consumers' disposable income. Consumers
in turn are highly sensitive to macroeconomic factors. Given the
difficult consumer spending environment in the past couple of
quarters, things have become a little difficult for Coach.
The company reported dismal second-quarter fiscal 2014
results. The company came up with disappointing sales that
declined 6% to $1,419.6 million - after dipping 1% during the
first quarter - due to sluggishness in the North American market
and also fell short of the Zacks Consensus Estimate of $1,501
The bottom line also failed to impress investors, as quarterly
earnings of $1.06 per share missed the Zacks Consensus Estimate
of $1.11 and tumbled 13.8% from the prior-year quarter.
The softness in results triggered a downtrend in the Zacks
Consensus Estimate, as analysts became less constructive on the
stock's future performance. This is evident from the movement
witnessed in the Zacks Consensus Estimate that fell 6.6% to $3.24
for fiscal 2014 and 7.1% to $3.54 per share for fiscal 2015 in
the past 7 days.
Fashion obsolescence remains a major concern for Coach's
business model, which involves a sustained focus on product and
design innovation. The company's pioneer position could be
affected by delays in product launches. It is noteworthy that the
company operates in the highly competitive premium handbag and
Stocks that Warrant a Look
Better-ranked retail stocks that look promising and are
expected to sustain their upbeat performance include
G-III Apparel Group, Ltd.
) sporting a Zacks Rank #1 (Strong Buy), along with
Gildan Activewear Inc.
Michael Kors Holdings Limited
), both of which hold a Zacks Rank #2 (Buy).
COACH INC (COH): Free Stock Analysis Report
G-III APPAREL (GIII): Free Stock Analysis
GILDAN ACTVWEAR (GIL): Free Stock Analysis
MICHAEL KORS (KORS): Free Stock Analysis
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