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What to Watch in the Day Ahead - Tuesday, April 28 Apr 27 2015
Coach (COH) Stock Higher Today Ahead of Tuesday’s Earnings Results Apr 27 2015
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Coach to Host Third Quarter of Fiscal Year Earnings Call Apr 21 2015
Coach to Host Third Quarter of Fiscal Year Earnings Call Apr 21 2015
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Stock Pops & Drops: COH, BTU, KBH & PNRA Apr 16 2015
Coach: In the Lap of Luxury? Apr 16 2015
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Coach (COH) Stock Rising Today Following Higher Analyst Rating Apr 16 2015
China’s JD.com sets up global e-commerce platform to challenge Alibaba Apr 15 2015
Crocs, Inc. Appoints Coach's Ian Bickley to Board of Directors Apr 14 2015
Crocs, Inc. Appoints Coach's Ian Bickley to Board of Directors Apr 14 2015
Coach Sniffs At Estee Lauder, Shifts To Interparfums Apr 10 2015
Coach and InterparfumsSA Sign Global License Agreement for Coach Fragrance Apr 09 2015

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User Comments

ReplyMocheng - 10 months ago
Stockvaluepicker,I think coach brand got trashed, heard a lot of shoppers cursing at Coach when they bought at a retail store 1 month before and saw the same bags are outlets 30% lowered in price.
ReplyStockvaluepicker - 10 months ago
Coach, Inc (NYSE: COH, $40) O/S: 278.8m; Market cap: $11.07bn; EV: $10.52bn; P/E: 12; EV/EBITDA: 7
Coach is a luxury goods retailer and has been in the business for > 70 years. Company sells premium leather handbags, footwear, watches and accessories for women (80% of sales), men (10%) and other (10%). Coach sells its products in North America (70% of sales) and internationally (30%) including Japan and China.
Investment thesis:
After its recent free-fall (YTD-28%) due to weak Q3 results (SS sales down -13% q/q in 2Q and -21% q/q in 3Q in NA) and lower guidance, Coach offers a compelling long-term investment opportunity.
1. First, Coach is led by the one of the best management team in retail. 2004-2013, sales grew from $1.3b to $5.0b (CAGR 20%); FCF/share up from $0.99 to $4.10 (CAGR 17%)
2. Coach has strong moat (in terms of emotional attachment with customer); evidenced by ROC of ~35% consistently over the last 10 years.
3. Despite, stiff competition from Michael Kors, Coach achieves gross margins of 70%; best margins in the luxury retail sector
4. Growth prospects are robust as new product line (focused on Men) and geographic expansion (China sales up 25%) working well
5. Huge operating leverage
6. No debt; cash balance of ~$800m
All good, but why the market is punishing the stock/ bear hug?
1. NA sales decline intensified in Q3
2. Guidance lowered (management expects NA sales decline in 2015 also)
3. Dual sales (factory outlet and direct stores) channel might dilute the brand value
4. International sales might drag gross margins as competition intensifies
5. Market has recently seen many retail turnarounds failing (JC Penny)
Argument: Sales decline; management is
- NA gross margins are at (68% to 63%) and International gross margins are at (80%) - effects of foreign currency translation should be noted.
- International expansion should boost sales growth
- Huge margin of safety
- Intrinsic value in different scenario
- Bull Case: $74 (upside 84%); Bear Case: $52 (upside 30%); Base case:$62(upside 54%)

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