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Coach's (COH) Strategic Efforts Impress: Should You Hold?
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A prudent investment decision involves buying stocks that offer solid prospects and selling those that appear risky. Again, at times it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions. These stocks rally as soon as the market enters into a correction mode. Here we have discussed one such stock, Coach, Inc. with expected long-term earnings per share growth rate of 9.9% and a VGM Score of “B”. So far in the year, the stock has advanced roughly 14%.
Coach has undertaken transformational initiatives revolving around its products, stores and marketing to pull itself back on the growth trajectory and emerge as a multi-brand company.
Hidden Catalysts
As one of the leading American marketers of fine accessories and gifts, Coach boasts a proven strategy of investing in stores to enhance their sales output through product innovation, a compelling pricing strategy, new merchandise assortments, and a cost-effective global sourcing model. We believe that these strategies will help drive comparable-store sales and operating margins in the long term. The company’s growth drivers include expansion of its global distribution model and venturing into under-penetrated markets.
Coach is undergoing a brand transformation and is introducing modern luxury concept stores in key markets. The acquisition of Stuart Weitzman has been accretive to its performance, and is being viewed as a significant step in its efforts toward becoming a multi-brand company. The company also remains optimistic about its dual-gender Legacy lifestyle collection, dedicated men's stores and international growth opportunities. It is also aggressively expanding its E-commerce platform.
The company’s strategic endeavors helped it post tenth straight quarter of positive earnings surprise when it reported fourth-quarter fiscal 2016 results, wherein both the top and bottom lines grew year over year. Coach also registered positive comparable-store sales at its North American segment for the first time in over three years. The company’s international operations also witnessed robust growth. Management now projects low-to-mid single digits increase in revenue and double-digit growth in earnings per share during fiscal 2017.
Hurdles to Cross
Coach sells products that are discretionary in nature, and thus depends upon consumers’ disposable income, which is sensitive to macroeconomic factors. Further, fashion obsolescence remains the main concern for the company’s business model, which involves a sustained focus on product and design innovation.
Coach also generates a significant amount of net sales outside the U.S. Due to high exposure to international markets the company remains susceptible to currency fluctuations. The weakening of foreign currencies against the U.S. dollar may require it to either raise prices or contract profit margins in locations outside the U.S. An increase in price may have an adverse impact on the demand for its products.
Given the pros and cons embedded, the stock currently carries a Zacks Rank #3 (Hold).
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Coach's (COH) Strategic Efforts Impress: Should You Hold?
A prudent investment decision involves buying stocks that offer solid prospects and selling those that appear risky. Again, at times it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions. These stocks rally as soon as the market enters into a correction mode. Here we have discussed one such stock, Coach, Inc. with expected long-term earnings per share growth rate of 9.9% and a VGM Score of “B”. So far in the year, the stock has advanced roughly 14%.
Coach has undertaken transformational initiatives revolving around its products, stores and marketing to pull itself back on the growth trajectory and emerge as a multi-brand company.
Hidden Catalysts
As one of the leading American marketers of fine accessories and gifts, Coach boasts a proven strategy of investing in stores to enhance their sales output through product innovation, a compelling pricing strategy, new merchandise assortments, and a cost-effective global sourcing model. We believe that these strategies will help drive comparable-store sales and operating margins in the long term. The company’s growth drivers include expansion of its global distribution model and venturing into under-penetrated markets.
Coach is undergoing a brand transformation and is introducing modern luxury concept stores in key markets. The acquisition of Stuart Weitzman has been accretive to its performance, and is being viewed as a significant step in its efforts toward becoming a multi-brand company. The company also remains optimistic about its dual-gender Legacy lifestyle collection, dedicated men's stores and international growth opportunities. It is also aggressively expanding its E-commerce platform.
The company’s strategic endeavors helped it post tenth straight quarter of positive earnings surprise when it reported fourth-quarter fiscal 2016 results, wherein both the top and bottom lines grew year over year. Coach also registered positive comparable-store sales at its North American segment for the first time in over three years. The company’s international operations also witnessed robust growth. Management now projects low-to-mid single digits increase in revenue and double-digit growth in earnings per share during fiscal 2017.
Hurdles to Cross
Coach sells products that are discretionary in nature, and thus depends upon consumers’ disposable income, which is sensitive to macroeconomic factors. Further, fashion obsolescence remains the main concern for the company’s business model, which involves a sustained focus on product and design innovation.
Coach also generates a significant amount of net sales outside the U.S. Due to high exposure to international markets the company remains susceptible to currency fluctuations. The weakening of foreign currencies against the U.S. dollar may require it to either raise prices or contract profit margins in locations outside the U.S. An increase in price may have an adverse impact on the demand for its products.
Given the pros and cons embedded, the stock currently carries a Zacks Rank #3 (Hold).
COACH INC Price, Consensus and EPS Surprise
COACH INC Price, Consensus and EPS Surprise | COACH INC Quote
Stocks that Warrant a Look
Investors may consider better-ranked stocks such as The Children's Place, Inc. (PLCE - Free Report) and Urban Outfitters Inc. (URBN - Free Report) both sport a Zacks Rank #1 (Strong Buy), and Nordstrom Inc. (JWN - Free Report) carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>