We reiterated our long-term Underperform recommendation on
) with a target price of $50.00.
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, as was
evident in its last quarterly performance.
Coach reported first-quarter fiscal 2014 results on Oct 22, 2013.
The performance was disappointing on the sales front, which fell
1% to $1,150.8 million, after rising 6% during fourth-quarter
fiscal 2013. The decrease was due to softness in the North
Net sales also fell short of the Zacks Consensus Estimate of
$1,191 million. The bottom line also failed to impress investors,
as it remained flat at 77 cents per share compared with the
prior-year quarter and the Zacks Consensus Estimate.
COACH INC (COH): Free Stock Analysis Report
COLUMBIA SPORTS (COLM): Free Stock Analysis
G-III APPAREL (GIII): Free Stock Analysis
MICHAEL KORS (KORS): Free Stock Analysis
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Fashion obsolescence is another factor that 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 accessories segment.
Estimates for Coach have shown a downtrend for quite some time
with analysts becoming less constructive on the stock's future
performance. This is evident from the movement witnessed in the
Zacks Consensus Estimate that fell 8.9% to $3.47 for fiscal 2014
and 10.1% to $3.81 per share for fiscal 2015 in the past 90 days.
However, prudent measures taken by Coach such as store expansion
plans, compelling pricing strategy, new merchandise assortments
and a cost-effective global sourcing model can steadily improve
the operational performance of this Zacks Rank #4 (Sell) stock in
the future. Nevertheless, we believe that given the absence of
near-term growth catalysts and sluggish economic recovery,
Coach's performance is likely to remain strained in the near
Other Stocks to Consider
Not all retail stocks are performing as disappointingly as Coach.
Other stocks worth considering in the retail sector include
G-III Apparel Group, Ltd.
Columbia Sportswear Co.
Michael Kors Holdings Ltd.
). While G-III Apparel carries a Zacks Rank #1 (Strong Buy),
Columbia Sports and Michael Kors have a Zacks Rank #2 (Buy).