Coach: A Growing Brand

Coach (COH)

Coach designs, makes and markets fine accessories for women and men, including handbags, weekend and travel accessories, outerwear, footwear, and business cases.

What I Like

With COH share price currently at $26.93 its shows the company is on an uptrend when valued against the 50-Day Moving Average, which is $25.84. With a 52-Week High of $32.96 (Aug 08) and a 52-Week Low $11.43 (Mar 09) the stock has seen the share of volatility that the markets have experienced. I have been a big fan of Coach for the past couple months as it has been on the Stocks on Wall Street Bullish List and I now want all readers to know about it. What I like about Coach is their winning brand, which has been successful in 2009 as consumers avoid European Brands with $2k+ price tags for Coach products. With the evolution of the Coach stores, they are gaining market share especially with their vast international expansion in Japan and China. Coach is opening 50 stores worldwide in the next five years, a number that would have been larger if it wasn’t for the overall weakness in the economy and consumer spending. Despite these concerns, analysts still expect Coach’s sales to grow 2% in 2009 and 3% in 2010. Coach has favorable long-term sales and earnings prospects, which should help it, prevail long-term even if consumer-spending weaknesses continue. In recent times, Coach has initiated a lower price strategy reducing prices 10-15% on the average handbag. This has proven successful in luring in new customers and we have seen the results in recent income statements. Right now valuations show that Coach is undervalued 25% compared to most other retailers making it an attractive investment. Volume is above 100,000, which is the threshold in which I set. They have outstanding numbers with a 28.77% return on equity and 46.07% return on assets. Another plus is the company is not in debt and has half a billion in cash on hand top help expand their worldwide brand.

What I Don’t Like

Risks for Coach are the consumer spending weakness that currently exists and whether or not it will continue, and if so how long.

Overview

Overall Coach is a strong growing brand that will continue to expand in the next few years which large growth opportunities internationally. I value Coach at $33 per share come 12-months from now.