) released a disappointing fourth quarter earnings report this
week. On the positive side, earnings were in line with the Zacks
Consensus Estimate, at 89 cents a share. This is an increase of
3.5% from 86 cents recorded in the year-ago quarter. Net sales
for the quarter came in at $1,222.7 million, an increase of 6%
from the year-ago quarter.
However, including one-time items, quarterly earnings came in 78
cents per share, lower than the year-ago quarter. Total revenue
was also lower than the Zacks Consensus Estimate of $1, 236
Reasons for the Decline
North American Sales, which account for 63% of Coach's total
sales, were the major factor behind Coach's decline. Stores of
the company open for at least a year declined by 1.7% in the
The decline in sales of women's handbags in the North American
region is at the root of the company's problems. In this case, a
drop in comparable-store sales occurred for the second time in
It seems the company has lost some ground to young shoppers who
are well informed about current fashion trends. The company's
executives accepted this criticism. In fact, Coach expects only a
low-double-digit percentage increase in sales of handbags and
accessories in North America.
The situation has been compounded by the departure of several key
officials. President for North America Mike Tucci and chief
operating officer Jerry Stritzke said they will be quitting the
company next month. Such departures are a matter of deep concern
as the company tries to reposition itself as a lifestyle brand
and attempts to expand into clothing, jewelry and shoes.
4 Other Choices
Overall, the company seems to be have a tough time ahead.
Investors will receive a better indicator about the company's
future only after it launches its first clothing line in October.
Clearly, there seem to be better choices in the clothing and
accessories domain going forward.
The one competitor whom Coach has been trying to keep pace with
Michael Kors Holdings Ltd
). The National Retail Federation has said that that the company
is now in second place on its STORES Hot 100 Retailers list,
gaining one spot since last year. In the last quarter, the
company's total revenue jumped 57.1% to $597.2 million in the
quarter, well ahead of the Zacks Consensus Estimate of $541
Slated to report earnings next week, Michael Kors holds a Zacks
Rank #2 (Buy) and has expected earnings growth of 26.08%. The
forward price-to-earnings ratios (P/E) for the current financial
year (F1) is 26.69.
Next up is Canadian company
Gildan Activewear Inc.
). Gildan, which posted earnings this week, experienced a 47%
increase in third quarter earnings. Owner of such brands as Gold
Toe and Anvil, the company's earnings touched $115.8 million (94
cents a share) for the third quarter.
Additionally, it announced that it was planning to purchase the
New Buffalo Shirt Factory Inc. for $7 million in order to expand
operations. Currently, GIL holds a Zacks Rank #2 (Buy) and
has expected earnings growth of 11.67%. It has a P/E (F1) of
) is our third choice. The company reported second-quarter 2013
adjusted earnings of $1.27 per share this month, higher than
$1.11 for the year-ago quarter. Owner of brands such as
Timberland and The North Face, the company's total revenue of
$2,220.4 million grew 4.0% compared with $2,141.8 million
recorded in the year-ago period.
This was primarily due to robust growth in its Outdoor &
Action Sports brands, international as well as direct-to-consumer
revenues. Besides a Zacks Rank #2 (Buy), the company has expected
earnings growth of 12.28%. It has a P/E (F1) of 18.38.
Our fourth choice is
), which posted impressive second quarter earnings this week.
Earnings per share increased 77.6% from the comparable prior-year
quarter to $1.19. This was also higher than the Zacks Consensus
Estimate of 96 cents by 24%.
These impressive results were primarily due to the 'Innovate to
Elevate' strategy adopted by HBI. The strategy lays greater
emphasis on value-added, higher-priced and higher-margin items,
produced at lower cost. The company has a Zacks Rank #1 (Strong
Buy), with expected earnings growth of 14.00% and a P/E (F1) of
Apart from the odd disappointment, apparel stocks seem to be good
bets at this point. All of these four choices would make good
additions to your portfolio.
COACH INC (COH): Free Stock Analysis Report
GILDAN ACTVWEAR (GIL): Free Stock Analysis
HANESBRANDS INC (HBI): Free Stock Analysis
MICHAEL KORS (KORS): Free Stock Analysis
V F CORP (VFC): Free Stock Analysis Report
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