Outlook for Coach's New Store Openings

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The number of Coach ( COH ) stores has increased from 396 in 2005 to around 700 in 2010 through the opening of new stores and expansion of existing facilities in North America, as well as in international markets like Japan and China. We expect a steady increase in the number of Coach stores as the company attracts more customers to its affordable luxury handbags and accessories. However, the rate of store growth will likely slow down in the coming years as the company concentrates more on expanding its existing stores.

Coach mainly competes with premium apparel and accessories players like Polo Ralph Lauren ( RL ), Liz Claiborne ( LIZ ), and AnnTaylor ( ANN ), as well as high-end brands like Louis Vuitton, Hermes, Gucci and Prada.

While we expect Coach's store count will cross 980 by the end of our forecast period, Trefis members anticipate the store count will reach 1,200, suggesting potential upside of 17% to our price estimate for Coach's stock.

We currently have a price estimate of $57.04 for Coach's stock , in line with the current market price.

China to Drive Total Square Footage

Coach acquired the distribution business in China from ImagineX group in 2009, adding 37 Coach China stores to its list of stores.

Coach's retail and factory square footage has grown at an average annualized rate of over 15% in both North America and Japan. We expect these regions will continue to see growth, however at a slower rate due to maturation of the luxury market in these regions.

In comparison, Coach's square footage in China has increased at an annualized rate of 88% from 2005 to 2009. With proposed 50% growth in square footage in China for 2010, Coach's growth plans for the region remain aggressive.

Growth Outlook for New Store Openings

The average square footage per Coach store increased in all geographies during the period from 2005 to 2009. Coach will likely continue to concentrate on expanding existing stores to offer a better assortment of products to consumers. This may result in fewer store openings in the future.

See our full analysis and $57.04 price estimate for Coach

Trefis Community Forecast

Trefis members expect the number of coach stores to increase from 656 in 2009 to 1,201 by the end of our forecast period, compared to the baseline Trefis estimate of an increase to 984 during the same period. The member estimates imply an upside of 17% to our $57.04 price estimate for Coach's stock.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: ANN , COH , LIZ , RL

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