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Accessories maker Coach, Inc.  (COH - Analyst Report) released a disappointing fourth quarter earnings report this week. On the positive side, earnings were in line with the Zacks Consensus Estimate, at 89 cents a share. This is an increase of 3.5% from 86 cents recorded in the year-ago quarter. Net sales for the quarter came in at $1,222.7 million, an increase of 6% from the year-ago quarter.

However, including one-time items, quarterly earnings came in 78 cents per share, lower than the year-ago quarter. Total revenue was also lower than the Zacks Consensus Estimate of $1, 236 million.

Reasons for the Decline

North American Sales, which account for 63% of Coach’s total sales, were the major factor behind Coach’s decline. Stores of the company open for at least a year declined by 1.7% in the latest quarter.

The decline in sales of women’s handbags in the North American region is at the root of the company’s problems. In this case, a drop in comparable-store sales occurred for the second time in three quarters.

Underlying Factors

It seems the company has lost some ground to young shoppers who are well informed about current fashion trends. The company’s executives accepted this criticism. In fact, Coach expects only a low-double-digit percentage increase in sales of handbags and accessories in North America.

The situation has been compounded by the departure of several key officials. President for North America Mike Tucci and chief operating officer Jerry Stritzke said they will be quitting the company next month. Such departures are a matter of deep concern as the company tries to reposition itself as a lifestyle brand and attempts to expand into clothing, jewelry and shoes.

4 Other Choices

Overall, the company seems to be have a tough time ahead. Investors will receive a better indicator about the company’s future only after it launches its first clothing line in October. Clearly, there seem to be better choices in the clothing and accessories domain going forward.

Michael Kors

The one competitor whom Coach has been trying to keep pace with is Michael Kors Holdings Ltd (KORS - Analyst Report). The National Retail Federation has said that that the company is now in second place on its STORES Hot 100 Retailers list, gaining one spot since last year.  In the last quarter, the company’s total revenue jumped 57.1% to $597.2 million in the quarter, well ahead of the Zacks Consensus Estimate of $541 million.

Slated to report earnings next week, Michael Kors holds a Zacks Rank #2 (Buy) and has expected earnings growth of 26.08%. The forward price-to-earnings ratios (P/E) for the current financial year (F1) is 26.69.

Gildan Activewear

Next up is Canadian company Gildan Activewear Inc. (GIL - Snapshot Report). Gildan, which posted earnings this week, experienced a 47% increase in third quarter earnings. Owner of such brands as Gold Toe and Anvil, the company’s earnings touched $115.8 million (94 cents a share) for the third quarter.  

Additionally, it announced that it was planning to purchase the New Buffalo Shirt Factory Inc. for $7 million in order to expand operations.  Currently, GIL holds a Zacks Rank #2 (Buy) and has expected earnings growth of 11.67%. It has a P/E (F1) of 17.20.

V.F. Corporation

V.F. Corporation (VFC - Analyst Report) is our third choice. The company reported second-quarter 2013 adjusted earnings of $1.27 per share this month, higher than $1.11 for the year-ago quarter. Owner of brands such as Timberland and The North Face, the company’s total revenue of $2,220.4 million grew 4.0% compared with $2,141.8 million recorded in the year-ago period.

This was primarily due to robust growth in its Outdoor & Action Sports brands, international as well as direct-to-consumer revenues. Besides a Zacks Rank #2 (Buy), the company has expected earnings growth of 12.28%. It has a P/E (F1) of 18.38.

Hanesbrands Inc.

Our fourth choice is Hanesbrands Inc. (HBI - Analyst Report), which posted impressive second quarter earnings this week. Earnings per share increased 77.6% from the comparable prior-year quarter to $1.19. This was also higher than the Zacks Consensus Estimate of 96 cents by 24%.

These impressive results were primarily due to the ‘Innovate to Elevate’ strategy adopted by HBI. The strategy lays greater emphasis on value-added, higher-priced and higher-margin items, produced at lower cost. The company has a Zacks Rank #1 (Strong Buy), with expected earnings growth of 14.00% and a P/E (F1) of 17.45.

Apart from the odd disappointment, apparel stocks seem to be good bets at this point. All of these four choices would make good additions to your portfolio.

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