Earnings Preview: Coach

Coach (COH) is expected to report Q1 earnings Tuesday Oct. 21 before market open, with a conference call scheduled for 8:30 am ET.

Guidance

Analysts are looking for a profit of 44c on revenue of $765.57M. The consensus range is 40c to 45c for EPS, and revenue of $756.18M to $777.4M, according to First Call. In July, Coach forecast FY09 EPS of "at least" $2.25 vs. First Call consensus of $2.21 on revenue of $3.61B vs. First Call consensus of $3.56B.

Analyst Views

Between the faltering economy, soaring food and gas prices, limited credit, slumping home prices and worries about jobs, shoppers remain unnerved and have cut back spending on discretionary items. Instead of spending on luxury items, even the most upscale consumers are on the hunt for a bargain. Analysts believe Coach manages to cash in on this trend, having discovered that outlet stores are a good way to lure shoppers. In fact, BusinessWeek says that in recent months Coach has offered deeper discounts at its factory stores, especially "because it doesn't put its handbags on sale" at its full-price stores. BusinessWeek says that last year, Coach's factory stores recorded a high number of visitors who spent more than in the previous year on average.

At the same time, a Goldman Sachs analyst  says Coach's "high flying growth and outsized multiple has hit a speed bump" as it adjusts its prices. Shapira says that management recognizes it must deliver "newness at a price," and says she will listen as to whether executives will get the "pricing elasticity".