We retained our Neutral recommendation on
) with a target price of $60.00. The stock carries a Zacks Rank
Why the Reiteration?
Being a leading American marketer of fine accessories and
gifts, Coach boasts a proven strategy of investing in stores to
enhance store sales productivity through product innovation,
compelling pricing strategy, new merchandise assortments and a
cost-effective global sourcing model, which we believe should
help drive top and bottom-line growth. This was well reflected in
the company's third-quarter fiscal 2013 results, wherein top line
rose 7% and bottom line increased 9%.
The company remains optimistic about its dual-gender Legacy
lifestyle collection, dedicated men's stores and international
growth opportunities to counter the soft consumer scenario. The
company is also aggressively expanding its e-commerce platform.
Management expects to attain more than $600 million in sales
worldwide from its Men's business and at least $425 million in
sales in China in fiscal 2013.
Coach maintains a healthy balance sheet with a significant
cash balance and a negligible debt load. The company also has
been actively managing its cash flows by generating significant
free cash, making prudent capital investments and enhancing
shareholders return. The company's strong liquidity positions it
to drive future growth.
Store expansion strategy also remains on cards for Coach.
Management projects square footage growth of about 10% to 11%
during fiscal 2013. With a mature domestic market and difficult
consumer spending environment, as evident from flat
comparable-store sales forecast for the fourth quarter for North
America, the company is seeking opportunities
Moreover, what remains a matter of concern for Coach is
fashion obsolescence. The company's pioneering position may be
compromised by delays in its product launches. The company
operates in the highly competitive premium handbag and
accessories segment. The company faces stiff competition from
European luxury brands as well as private label retailers on
distinctiveness, innovativeness, quality and pricing, which will
likely continue to weigh on its results.
Stocks Worth Considering
Stocks worth considering in the textile, apparel industry are
G-III Apparel Group, Ltd.
Michael Kors Holdings Limited
), all of which hold a Zacks Rank #2 (Buy). The stocks are
expected to continue with their upbeat performances and sustain
their positive earnings surprise trend.
COACH INC (COH): Free Stock Analysis Report
G-III APPAREL (GIII): Free Stock Analysis
HANESBRANDS INC (HBI): Free Stock Analysis
MICHAEL KORS (KORS): Free Stock Analysis
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