Troubles for luxury retailer,
) seem far from over. Yesterday at the investors' day conference,
the company announced 70 store closures and projected a double
digit dip in its revenues for fiscal 2015. This triggered a massive
sell off leading to 9% erosion of market cap. Year to date
stock price has fallen over 35%.
Moreover, Coach expects same store sales in North America to
decline in high-teens in the fiscal. Meanwhile, operating margins
are expected to be around high teens as the company increases
investments across board.
Coach has been in troubled waters for quite sometime now. Fashion
obsolescence remains a major concern for Coach's business model,
which involves a sustained focus on product and design innovation.
It is a chilling reminder of what happens when consumer preference
change drastically and company fails to keep up with the changing
Moreover, emergence of other big names like
Michael Kors Holdings Limited
Kate Spade & Company
) in the premium handbags market has taken a lot of business away
Recently, Coach posted third-quarter fiscal 2014 earnings of 68
cents a share that beat the Zacks Consensus Estimate of 63 cents
but tumbled 19% from 84 cents delivered in the prior-year quarter.
Moreover, net sales for the quarter came in at $1,099.6 million,
down about 7% from the year-ago quarter and also fell short of the
Zacks Consensus Estimate of $1,134 million due to softness in the
North American market. On a constant currency basis, sales
To improve its performance, the company has resorted to vigorous
international and online expansion, utilizing the opportunities in
the growing men's accessory category and lastly, restructuring the
domestic operations by new product launches. Moreover, the company
will cut back on discounts and flash sales in favor of a semi
On the international front, China might provide the much needed
relief as Coach expects sales to grow substantially in the next
We believe that things might get worse for Coach before they get
better. However, we would like to label Coach as a wait and see
Currently, Coach carries a Zacks Rank #3 (Hold). Another retailer
worth consideration includes
), which sports a Zacks Rank #2 (Buy).
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COACH INC (COH): Free Stock Analysis Report
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