Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell) on Jun 24, 2014, following the
company's dismal third-quarter fiscal 2014 performance. Shares of
this designer and marketer of fine accessories and gifts have
dropped 25% since the earnings announcement on Apr 29.
Why the Downgrade?
Estimates for Coach have been portraying a downtrend since the
company delivered third-quarter results. 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. Sales also fell short of
the Zacks Consensus Estimate of $1,134 million.
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 results. Coach witnessed lower footfall in
stores, while online results were unfavorably impacted by the
company's decision to eliminate third party events and restrict the
access 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 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.
The Zacks Consensus Estimate has been portraying a downtrend as
analysts became less constructive on the stock's future
performance. Estimates for fiscal 2014 and 2015 dropped 3.2% and
19.5% to $3.05 and $2.76 per share, respectively.
Other Stocks to Consider
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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