Back to top

Analyst Blog

Coach, Inc. (COH - Analyst Report) seems to be failing to impress investors, as shares of this textile-apparel retailer have slumped 23.4% since it posted its third-quarter fiscal 2014 results on Apr 29, 2014. Moreover, the company’s shares have tanked 36.9% year to date, reaching a 52-week low of $34.31 on Jun 20.

Coach is losing momentum primarily due to soft sales, particularly in its North American segment that contributes the lion’s share to the top line. On the contrary, retailers like Michael Kors Holdings Limited (KORS - Analyst Report) and Kate Spade & Company (KATE - Snapshot Report) have been filling their coffers with strong sales, thereby providing stiff competition to Coach.

In its last reported quarter, Coach’s sales declined 7% to $1,099.6 million and also fell short of the Zacks Consensus Estimate of $1,134 million. This is the second consecutive revenue decline for the company, following a 6% decrease in the previous quarter.

Management stated that torpidity in the North American women’s bag and accessories business offset sturdy growth in men’s, footwear and across the Asian and European markets. Adverse weather conditions and a shift in the Easter holiday also dampened results.

Additionally, Coach witnessed lower footfall in stores, while online results were unfavorably impacted by its decisions to eliminate third-party events, and restrict the accessibility to factory flash site.

This Zacks Rank #3 (Hold) stock has long-term earnings growth expectation of 11.3%, which is relatively lower than the peer group average of 13.2%, depicting inherent weakness.

Fashion obsolescence remains a major concern for Coach’s business model, which involves a sustained focus on product and design innovation. The company’s market share could be further affected by delays in product launches as it operates in the highly competitive premium handbag and accessories segment.

However, a better-than-expected bottom-line is still providing some cushion to the stock, wherein earnings of 68 cents a share beat the Zacks Consensus Estimate by 7.9% but tumbled 19% year over year.

A better-ranked stock in the same industry that warrants a look with a Zacks Rank #1 (Strong Buy) include Vince Holding Corp (VNCE - Snapshot Report).

Please login to Zacks.com or register to post a comment.