It seems that investors are losing confidence in
), after this designer and marketer of fine accessories and gifts,
posted soft third-quarter fiscal 2014 results. Shares of this Zacks
Rank #3 (Hold) company have dropped 11.5% since the earnings
announcement on Apr 29, whereas year-to-date, the stock has fallen
27.2%. Yesterday, the stock reached a 52-week low of $40.34.
Estimates for Coach have been portraying a downtrend since the
company delivered third-quarter results. It seems that analysts
have become less constructive on the stock's future performance.
This is evident from the movement witnessed in the Zacks Consensus
Estimate that tumbled 3.8% to $3.05 for fiscal 2014 and 19.2% to
$2.78 per share for fiscal 2015 in the past 60 days.
The New York-based company disappointed on the sales front that
declined 7% to $1,099.6 million - after decreasing 6% during the
second quarter - due to sluggishness in the North American market,
and also fell short of the Zacks Consensus Estimate of $1,134
Management stated that torpidity in the North American women's
bag and accessories business offset sturdy growth witnessed in
men's, footwear and strong results across Asian and European
markets. Adverse weather conditions and a shift in the Easter
holiday also impacted the results. Coach witnessed lower footfall
in stores, while online results were unfavorably impacted by the
company's decisions to eliminate third party events, and restrict
the accessibility to factory flash site.
Fashion obsolescence remains a major concern for Coach's
business model, which involves a sustained focus on product and
design innovation. The company's pioneering position could be
affected by delays in product launches as it operates in the highly
competitive premium handbag and accessories segment.
However, what is still providing some cushion to the stock is
the better-than-expected bottom-line result, wherein earnings of 68
cents a share beat the Zacks Consensus Estimate by 7.9% but tumbled
19% year over year.
We believe Coach's focus on investing in stores to enhance store
sales productivity through product innovation, a compelling pricing
strategy and new merchandise assortments may act as catalysts. 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.
Other better-ranked retail stocks that look promising and are
expected to continue with their upbeat performance include
Columbia Sportswear Company
) all holding a Zacks Rank #2 (Buy).
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