Coach, Inc.
(
COH
), the designer and marketer of fine accessories and gifts and an
S&P 500 company, is slated to report its first-quarter 2013
financial results on October 23, 2012.
The current Zacks Consensus Estimate of 75 cents a share for
the quarter reflects a year-over-year growth of 2.7%. The
estimates in the current Zacks Consensus range between a low of
71 cents and a high of 81 cents a share. Revenue, as per the
Zacks Consensus Estimate, is $1,159 million for the quarter.
Fourth Quarter 2012, a Recap
Coach's fourth-quarter 2012 earnings of 86 cents a share beat
the Zacks Consensus Estimate by a penny, and increased 27% from
68 cents earned in the prior-year quarter buoyed by healthy
top-line growth on the back of strong sales in China.
The New York based company reported net sales for the quarter
at $1,155.2 million, up 12% from the year-ago quarter, but below
the Zacks Consensus Estimate of $1,197 million.
Management remains confident of sustaining double-digit growth
in both top and bottom lines in fiscal 2013.The company remains
optimistic about its unisex Legacy lifestyle collection,
dedicated Men's stores and international growth opportunities to
counter the soft consumer scenario in North America and sluggish
economic environment.
Coach's Men's business grew more than $400 million in fiscal
2012 on a global basis. Management anticipates Men's business to
be a major growth driver, with 25% or more of the company's
growth coming from it in the upcoming years.
(Refer the article:
Coach Beats by a Penny
)
Estimate Revisions Trend
Agreement
We do not see any major estimate revisions at this point. Only
one out of 24 analysts covering the stock revised the estimate
downwards in the last 7 and 30 days, and none raised the same for
the first quarter of 2013. For fiscal 2013, one analyst moved up
the estimate and 2 analysts lowered the same in the last 30 days.
None of the analysts revisited their estimates in the last 7
days.
Magnitude
No movement was noticed in the Zacks Consensus Estimates for
the first quarter as well as for fiscal 2013 either in the last 7
or 30 days, and remained constant at 75 cents and $3.85
respectively. Most of the analysts remained constructive on the
stock based on the company's growth prospects and kept their
estimates intact, in the absence of any major news having a
direct or an indirect impact on the stock.
Positive Earnings Surprise History
With respect to earnings surprises, Coach topped the Zacks
Consensus Estimates over the last four quarters in the range of a
low of 1.2% to a high of 4.3%, with an average of 2.7%. This
implies that Coach has outperformed the Zacks Estimates by the
same magnitude over the last four quarters and we believe that
the company will continue to post better-than-expected results in
the coming quarters.
Our Take
Coach boasts of a proven strategy of investing in stores to
enhance sales productivity through product innovation, compelling
pricing strategy, new merchandise assortments and a
cost-effective global sourcing model, which should drive
comparable-store sales and operating margins in the long
term.
The company's long-term growth drivers include expansion of
its global distribution model and entry into under-penetrated
markets. The company lays more emphasis on globalization and
accelerated international distribution growth.
However, Coach sells products that are discretionary in
nature. Its customers remain sensitive to macroeconomic factors
including interest rate hikes, increase in fuel and energy costs,
credit availability, unemployment levels and high household debt
levels, which may negatively impact their discretionary spending,
and in turn the company's growth and profitability. Therefore, we
remain concerned about erratic consumer behavior and a sluggish
recovery in the economy.
Fashion obsolescence remains another concern for Coach's
business model, which requires sustained focus on product and
design innovation. The company's pioneer position may be
compromised by delays in its product launches.
Coach, which competes with
Polo Ralph Lauren Corporation
(
RL
), carries a Zacks #3 Rank, implying a short-term Hold rating for
the next 1-3 months. We maintain our long-term Neutral
recommendation on the stock.
COACH INC (COH): Free Stock Analysis Report
RALPH LAUREN CP (RL): Free Stock Analysis
Report
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