Could old crown survive from new rivals?
After Coach enjoying a long peaceful and prosperous growth ruling mid-high luxury market, underlying market/macro starts to change: economy enters a prolong recovery worldwide. It starts to face new rivals such as KOR and Kate, who takes chances from this big change, who shall be winners?
I do not know...
But I do know:
The whole economy is slower recovery mode. Mid income class they serve does not have more money to spend than before. In this type of environment,
COH: A turnaround story, right now it is on the way of declining. I do not want to pick up bottom. The key to turnaround is to pick up then when they are on the way up. Even given it is fashion industry, to turnaround a company requires multiple years of work, not to mention it has been this old company. It has resources to turn around. But Elephant is not built for one year. It could die in a year but will take several years to rebuilt.
KOR: A growth story. To design bag with similar quality but more affordable for customers competes with COH, old crown. Their growth has not struck to any stop yet. Every growth number looks great with no debt (25% growth rate). P/E only 20. It is a buy plus this year market punishes small cap a lot. S&P 500 P/E is 19 now. But CEO, please do not be arrogant yet. Old king is not dead. You are not new king yet.
Kate: A growth story/turnaround story. Reborn from restructuring, starts to take off. But given P/E 44.7, compared with other companies like KOR or S&P 500 19 P/E. hardly convinces me to buy in for now.
I buy KOR now and put close watch on COH and Kate.