Seeking Alpha

Shares of Coach reeling after revenue warning

  • Execs with Coach (COH -9.4%) came clean today during the firm's Analyst and Investor Day presentation, saying bold changes are needed in order to compete in the new retail landscape.
  • The retailer warns revenue could fall at a low double-digit rate for FY15.
  • Comp growth in North American is seen falling off a high teens percentage rate.
  • The stark outlook from Coach on its short-term prospects has sent shares down to their lowest level since 2010.
  • Analyst and Investor Day presentation webcast
Comments (65)
  • Archman Investor
    , contributor
    Comments (2354) | Send Message
     
    Uh oh. The rich cut back on spending? Hmm..

     

    Cause we know that everyone else just owns counterfeit COH.
    19 Jun, 12:33 PM Reply Like
  • chopchop0
    , contributor
    Comments (3138) | Send Message
     
    No need to own counterfeit COH these days. They are a $50-100 purse company now. They've sold out, gone mass market and sell lots of stuff in their outlets.
    19 Jun, 10:59 PM Reply Like
  • wyostocks
    , contributor
    Comments (7641) | Send Message
     
    The first of many to come.
    Wait till the sheeple get their electric bills this summer and the impact of higher gas prices kick in.
    19 Jun, 12:36 PM Reply Like
  • jeepnsam
    , contributor
    Comments (50) | Send Message
     
    $KORS and $KATE taking more than market share from $COH
    Rich and Upper Middle class still spending, just not on $COH
    Look at Tesla, MK sales
    19 Jun, 12:40 PM Reply Like
  • Brad Castro
    , contributor
    Comments (1284) | Send Message
     
    That's how I read it as well . . .
    19 Jun, 12:54 PM Reply Like
  • bgold1955
    , contributor
    Comments (1947) | Send Message
     
    Right on. KORS still killing it. The more wealthy are spending as much as they ever have. Doom & gloom always around on an individual level.
    19 Jun, 12:58 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    KORS will get crushed eventually. BTW, the key words above are "short term prospects". To Wall Street that means the next 6 months or so. COH isn't going out of business.
    19 Jun, 01:09 PM Reply Like
  • chopchop0
    , contributor
    Comments (3138) | Send Message
     
    "KORS will get crushed eventually. BTW, the key words above are "short term prospects". To Wall Street that means the next 6 months or so. COH isn't going out of business."

     

    KORS has been crushing COH for a few years now. just look at the charts.
    19 Jun, 11:00 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    Whatever troll.
    20 Jun, 04:11 AM Reply Like
  • chopchop0
    , contributor
    Comments (3138) | Send Message
     
    "Whatever troll."

     

    Facts hurt, huh?

     

    Btw, I bought DOW at 8 and V at 40, so I know how to find multi-baggers too.
    20 Jun, 08:41 AM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    My take:

     

    I listened to the Analyst day audio and was amazed at the intelligence and commitment of the top COH employees show in their efforts. These people saw these problems awhile ago and the fixes are going into place later this year. I bought too early at 48, 43 and 39 (last week). That said, as nervous as I am, I am amazed at the sophisticated efforts of COH management to reinvigorate their brand. I would not be surprised that COH is not a $100 stock within 5-7 years. That said I hope the dividend stays solid.

     

    I have been through this before and it never gets easy. When a stock is beaten down, the worst people come out of the woodwork to make you nervous about your investment. What could their purpose be? Its doesn't matter as it shows the worst that human beings can be...sort of like the people who stand at the base of a building telling a person at the top to jump. That said, hang in there COH longs. I suggest avoiding COH articles for a month or so to avoid people that only put out their negativism to the world.

     

    Good luck.
    20 Jun, 08:48 AM Reply Like
  • chopchop0
    , contributor
    Comments (3138) | Send Message
     
    "I suggest avoiding COH articles for a month or so to avoid people that only put out their negativism to the world."

     

    The people who took your advice would need to avoid them a lot longer than that

     

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    20 Jun, 08:56 AM Reply Like
  • Brad Castro
    , contributor
    Comments (1284) | Send Message
     
    Actually, the first two are positive articles and they were both good calls at the time.
    20 Jun, 09:25 AM Reply Like
  • jzheng220wz
    , contributor
    Comments (104) | Send Message
     
    it's not easy to turn around a fashion brand
    19 Jun, 12:41 PM Reply Like
  • Intangible Valuation
    , contributor
    Comments (612) | Send Message
     
    Interesting observation. Do you have a specific case study in mind when you say that?
    19 Jun, 02:20 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    No, of course they dont.
    19 Jun, 02:23 PM Reply Like
  • jzheng220wz
    , contributor
    Comments (104) | Send Message
     
    I have shopped Coach couple times during past, including the online outlet site. I just noticed recently that they did promotions almost everyday(online outlet site), which they normally did once a while during past. Coach is currently in awkward situation, on one hand they are losing the luxury appealing, but on the other hand they have to keep doing promotions (mostly outlet channel) to generate cash flow. Been an investor of COH before, got out long time ago with small profit, they are a good brand, wish they can come back strong one day, but the question is when.
    20 Jun, 09:27 AM Reply Like
  • Cygnusx3
    , contributor
    Comments (49) | Send Message
     
    Yeah, I'm worried that the rich will stop buying things for themselves. Keeps me up at night.
    19 Jun, 02:05 PM Reply Like
  • Fluffer
    , contributor
    Comments (24) | Send Message
     
    COH is not a brand for rich people any more. Look at the people who carry their bags. It is more like secretaries and dental office assistants.

     

    That is their problem. Management juiced sales in the downturn by going downmarket and expanding the outlet sales. They have harmed their brand and lost their cachet. Good luck getting it back. Why do you think their longtime CEO Frankfort bailed? He saw the writing on the wall.

     

    So glad I sold it all at $60!
    19 Jun, 02:10 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    Sure you sold at 60. He "bailed" because he is in his mid 60s and was with the company over 30 years. Its called retirement. Your comment has no credibility.
    19 Jun, 02:24 PM Reply Like
  • Fluffer
    , contributor
    Comments (24) | Send Message
     
    Sure, keep your head in the sand. Denial is not just a river in Egypt. Once the brand is compromised, you are in a world of hurt.
    19 Jun, 02:52 PM Reply Like
  • Stan Ackman
    , contributor
    Comments (807) | Send Message
     
    Fluffer, what you said about COH is exactly right. Coach has rolled out its luxury/premium circle. This is a very typical circle. KORS is doing the same thing now. Eventually, people will notice KORS is just another brand worn by another typical lady in the subway. They may even feel maybe it is time to buy Coach again because not as many people buy it anymore. I still can't afford LV. Coach is my choice.

     

    It is just hard to know how long the circle will roll. Fresh products with sound design will affect the circle for sure.
    19 Jun, 03:42 PM Reply Like
  • Charles Moscoe
    , contributor
    Comments (1361) | Send Message
     
    KORS is being heavily discounted and cannot sustain its pricing power. It will be commoditized. I just bought my wife a KORS bag for $100 that compares to the one I bought her 2 years ago for $250. Both were new styles at the time. I think they make nice products though.
    19 Jun, 05:27 PM Reply Like
  • chopchop0
    , contributor
    Comments (3138) | Send Message
     
    "COH is not a brand for rich people any more. Look at the people who carry their bags. It is more like secretaries and dental office assistants.

     

    That is their problem. Management juiced sales in the downturn by going downmarket and expanding the outlet sales. They have harmed their brand and lost their cachet. Good luck getting it back. Why do you think their longtime CEO Frankfort bailed? He saw the writing on the wall.

     

    So glad I sold it all at $60!"

     

    Exactly!! They sold out and went mass market and it has blown up in their face. I got out at $56 and haven't looked back
    19 Jun, 11:01 PM Reply Like
  • chopchop0
    , contributor
    Comments (3138) | Send Message
     
    "KORS is being heavily discounted and cannot sustain its pricing power. It will be commoditized. I just bought my wife a KORS bag for $100 that compares to the one I bought her 2 years ago for $250. Both were new styles at the time. I think they make nice products though."

     

    COH already went through that. The purse industry is fickle. Best to avoid and stick to other types of investments.
    19 Jun, 11:02 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    Troll
    20 Jun, 04:11 AM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    Troll.
    20 Jun, 04:12 AM Reply Like
  • Charles Moscoe
    , contributor
    Comments (1361) | Send Message
     
    Agreed. I'd only be playing KORS short right now and as far as COH, I don't think it is a buy or sell at this point.
    20 Jun, 06:29 PM Reply Like
  • Rudester
    , contributor
    Comments (2068) | Send Message
     
    Glad I closed out my position on COH last week, after reading the article on the resignation of the audit committee chair and having my wife look at the pictures of their new purses they are planning to launch in the fall. The wife had been a loyal Coach customer for years but didn't like most all of the new models.
    19 Jun, 04:38 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    Yes, you have the most perfect timing. Now move on to another stock.
    19 Jun, 04:42 PM Reply Like
  • Rudester
    , contributor
    Comments (2068) | Send Message
     
    Thanks for your concern. Yes, I moved to MSFT and TUP.
    19 Jun, 04:50 PM Reply Like
  • MisterJ
    , contributor
    Comments (589) | Send Message
     
    From my experience this looks like a good turnaround candidate. 80:20 chance it will work out, the 20% option is of course really nasty. I'm taking the risk.
    19 Jun, 05:46 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    As far as I know, they are still profitable and they predicted revenue grow for FY 2016. I understimated how low it could go.
    19 Jun, 05:53 PM Reply Like
  • newnnly
    , contributor
    Comments (243) | Send Message
     
    choiminshik I am in the same place you are with COH. And I think you are correct in not selling at the bottom if you can wait for awhile. Let's see what the new line in the fall does. In the meantime I'll hold long with a paper loss and collect a 3.44% dividend yield and reinvest into more shares. I was down a couple thousand dollars in TEVA and now I'm back up. I have some really good picks and some not so good, like COH. But overall my portfolio is doing great. I know exactly what you feel like today and I just wanted to let you know that.

     

    Good luck choiminshik!
    19 Jun, 06:56 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    Thanks. Its always easy to bash a stock when its down. COH is the worst performing stock in the S&P this year, but it could be the best next year. I am down 5000 on COH now. I bought at 48, 43 and 39. I think tax loss selling will keep COH down for the rest of the year.
    19 Jun, 08:51 PM Reply Like
  • newnnly
    , contributor
    Comments (243) | Send Message
     
    I only have 100 shares but I got them at 49 so I'm down about 1500. At least I didn't double down and buy more shares yet. And yes choiminshik, I read the same comments you do and feel the same feelings. That's been the hardest part of investing for me. Intellectualizing the information instead of emotionalizing it. For now all we can do is focus on the turnaround and collect our dividends. Keep the positive info on COH coming. It's much appreciated.
    20 Jun, 07:37 PM Reply Like
  • Sceptic too
    , contributor
    Comments (7) | Send Message
     
    Coach is closing 60-70 stores, a lot of them outlets. They will come out very strong with men's line. If the economy grows, a middle class will still be able to enjoy a splurge, unlike KORS or Kate products.
    19 Jun, 08:27 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    Agreed. I owned SBUX 5 years ago and bought it at 7 and they closed several hundred stores. Its over 70 now.
    19 Jun, 08:53 PM Reply Like
  • Brad Castro
    , contributor
    Comments (1284) | Send Message
     
    SBUX was definitely a once in a generation buying opportunity back in '09, but I don't believe it ever got down to 7.

     

    Maybe you got in in the 9s?
    19 Jun, 09:07 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    I bought it at 7.41 I believe in November 2008. Look it up. It was not easy buying then especially since I had bought it at 18 and 16 and Wall Street was completely against it just like it is against COH now.
    19 Jun, 09:15 PM Reply Like
  • wyostocks
    , contributor
    Comments (7641) | Send Message
     
    choiminshik

     

    Have you noticed that all our previous comments to each other have disappeared?

     

    WTF is SA doing?
    19 Jun, 09:53 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    I have seen that happen sometimes. You will see them again.
    19 Jun, 09:55 PM Reply Like
  • Brad Castro
    , contributor
    Comments (1284) | Send Message
     
    "I bought it at 7.41 I believe in November 2008. Look it up. It was not easy buying then especially since I had bought it at 18 and 16 and Wall Street was completely against it just like it is against COH now."

     

    My bad - I guess I was remembering my cost basis - I owned both stock and long call LEAPS when the stock was in the $9-$10 range. But I got greedy and wrote too many calls against the overall position and eventually forced myself out of it altogether.

     

    I made great returns - 60%+ in just a matter of a few months - but I missed out on the 700-800% capital gains I could've had if I'd just held still (not to mention a double digit effective dividend yield/yield on cost).

     

    Hopefully, you're still in your SBUX position.

     

    Good luck with COH - the only position I had was writing a couple of cash-secured puts back in April at the $49 strike price - it was actually an idea generated by one of my members.

     

    His idea that week was better than mine so we went with his - and where we saved our goose was that we chose a weekly expiration prior to earnings. Final result was a 17.12% annualized return over 25 days.

     

    I have a great deal of respect for the COH culture, and I've always preferred companies whose clientele have money over those whose clientele don't, and, long term, I expect the company to be just fine.

     

    But for me personally, clothing/fashion retail is not an area where I feel I have any particularly useful insights - plus it's a highly competitive landscape.

     

    SBUX, I felt at the time, was a complete no-brainer - I had 100% confidence in the future of the company (at the time, the consensus/fear was that MCD and Dunkin' Donuts were going to take business away plus the deteriorating economy so it was a double whammy).

     

    I don't feel I'm wired to be able to identify whether COH is in the same situation so I'll probably remain on the sidelines.

     

    Good luck . . .
    20 Jun, 10:09 AM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    I still hold SBUX. I listened to COH executives and they sound very focused and I like their plans. That said I should have been more disciplined in my share purchases in COH.
    20 Jun, 10:24 AM Reply Like
  • wykie722
    , contributor
    Comments (9) | Send Message
     
    It's never good when a company goes into debt to fund its dividend. That's what they're doing now. This looks similar to GM to keep mutual funds appeased and we all know how that turned out.
    19 Jun, 09:39 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    Do you know what you are talking about? AAPL is doing that right now as well. AAPL has borrowed billions to buy back stock and pay dividends. COH has several hundred million overseas and doesnt want to bring it back and incur a tax. Man, some of the comments on SA are way out of touch and downright misleading.

     

    COH's situation is nothing like GM. Not even close.
    19 Jun, 09:45 PM Reply Like
  • Long Term Value
    , contributor
    Comments (171) | Send Message
     
    What a mess of a presentation. So long, so confusing.

     

    At 3.41 (that is 3 hours and 41 minutes) into the presentation they distinctly called the same store comp down in the mid 20s. What?! That is an absolute disaster and if that is the case they have some explaining to do.

     

    Perhaps this is due to closures while remodeling? Maybe changeover in promotion activity? I don't know and it seems like they don't either.

     

    It appears they are going to spend close on $900 million on these projects, whoch is roughly all the cash they have on hand. Presumably they will be generating new cash, though with the suggested comp reductions this is no longer clear.

     

    The IR lady, Andrea Resnick was a dreadful moderator, very snippy and offputting. They need to rep,ace her - she gave a bad impression.

     

    This call shocked me.
    20 Jun, 02:17 AM Reply Like
  • Gustavo78
    , contributor
    Comments (17) | Send Message
     
    I was there in person. Complete disagree with you. The presentation was good and they gave a lot of details of the restructuring. Wall Street sold off the shares exactly when the CFO presented the 20% decrease in revenues for FY15. Short term thinking IMO. They released a comprehensive plan to turn around the brand. My impressions over the new Verves collection and store re-design was indeed very good. Amazing opportunity to grow in men's segment and Asia. They made a mistake and they recognize it. They are fixing. They showed the slow down in revenues and are not trying to hide. I like to buy low. I like turn around cases... and I don't like to buy perfect blue sky cases as Kors, Kate etc... and IMHO Coach has a superior brand/product/logistic... sheet.
    20 Jun, 09:54 AM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    I agree:

     

    I listened to the Analyst day audio and was amazed at the intelligence and commitment of the top COH employees show in their efforts. These people saw these problems awhile ago and the fixes are going into place later this year. I bought too early at 48, 43 and 39 (last week). That said, as nervous as I am, I am amazed at the sophisticated efforts of COH management to reinvigorate their brand. I would not be surprised that COH is not a $100 stock within 5-7 years. That said I hope the dividend stays solid.

     

    I have been through this before and it never gets easy. When a stock is beaten down, the worst people come out of the woodwork to make you nervous about your investment. What could their purpose be? Its doesn't matter as it shows the worst that human beings can be...sort of like the people who stand at the base of a building telling a person at the top to jump. That said, hang in there COH longs. I suggest avoiding COH articles for a month or so to avoid people that only put out their negativism to the world.

     

    Good luck.
    20 Jun, 09:58 AM Reply Like
  • Long Term Value
    , contributor
    Comments (171) | Send Message
     
    I'm glad someone liked it. I listen to a lot of these and thought it was really bad.

     

    I don't think this is a Starbucks style turnaround. I own SBUX and bought it during the bad times. That was different - we got Howard back - and he saved it. There was no emergent competitor who was taking share. The stock had been severely overpriced and falling on valuation, then fell on bad economy and poor execution. Howard changed the internals and the economy turned around. We all made money.

     

    coach has been losing share in a recovering economy. They do not have new leadership, just a change of positions amid exisitng execs. The new designs look much like old designs to me. Concerning is that the proposed remodels look exactly like the store in Palo Alto, CA whoch is also devoid of customers.

     

    It was eyeopening when Ms. resnick, who was bragging about how great their remodled store on Fifth Ave NyC was doing, suddenly turned evasive when asked if the store was actually running positive comps. Since you were there - you must have seen that in the Q&A. I could hear the shock in the analyst's voice. Did she look shocked?

     

    I like the brand, it still has value. I am concerned about impact to the balance sheet and customer loss whoch may be very signficant.
    20 Jun, 11:08 AM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    I have been through this too many times with too many stocks. Analysts pump a stock at the top and crush it at the bottom. I can't predict what will happen at COH but I can tell you these executives mean serious business.

     

    One last example. HPQ in November 2012...down to 11 from 50. One prominent analyst had a "-$2" value on the stock. All the analysts were pumping AAPL at the time at 700. They all said PCs are fading because of tablets. HPQ had a heavy debt load. Guess which has had a better return? HPQ is in the mid 30s now and AAPL pre split is lower than their target back then. That is how Wall Street works.
    20 Jun, 12:28 PM Reply Like
  • Gustavo78
    , contributor
    Comments (17) | Send Message
     
    I dont think Palo Alto or NY comps is any indication of a turnaround. Too short term IMO (for good or for bad). And Stuart Verves first collection too... This is not about a collection or two or a pilot store in Palo Alto. They are not in denial, and they are doing radical changes. So I guess my point is that they are doing something significant. Changing the CEO is indeed a very significant thing. I know few CEOs that if they are out it will be a home run for the company. It doesnt matter if you get an insider or outsider, only time will tell... But if you dont change, you dont get different results. And they are changing.
    Anyway, wall street agrees with you. All the analysts too. Everybody is selling. No cheerleading at the analyst day. So for me, this is good. If Im lucky enough, when the stock is back to 80 dolars, and Victor Luis is overrated as CEO, and we have strong buy recommendations from WSt, I will be selling my position, not buying. I love to come by opportunities when I have a empty analyst day or a huge % of people in the room desliking everything the company is doing. Analyst opinions or their faces doesnt mean anything for me. One thing I can tell is that some of then are happy in getting a easy story to tell and then write bearish reports about Coach. This is what I call confort of the crowd. You look smart when u r skeptical.
    Lets see: (i) changing of command, (ii) not in denial, doing changes, (iii) strong brand, (iv) great market, (v) Wall St hates, (vi) cheap stock. Good risk reward for me. They have competitors, but who in the earth does not have? You said SBUX is different. I say every single turnaround is different. SBUX has competitors... Lots of them.
    I dont dispute you have lot of mileage inlistening calls. I just mention the fact I was there, which qualifies me in giving a different impression. I have been doing this for a very long time too, trust me.
    I will not make money making comments at SA. Thats why Im long the stock. I can lose too... Thats life.
    This is one of the few things I am not afraid to buy right now. Whole S&P so expensive for me.
    22 Jun, 06:34 PM Reply Like
  • Charles Moscoe
    , contributor
    Comments (1361) | Send Message
     
    Now I don't think KORS or KATE is a buy, and very well may be compelling shorts at current prices, but a huge difference here as they have much lower ASPs. If COH had to lower prices to where KORS and KATE products sell (and they very well might to ever increase sales again), then their current valuation is a thing of the past and the share price will have a long way down still before reaching bottom. I think its early to speculate on the turnaround, and I play lots of turnaround and not sure what makes this a convincing buy yet. I still think its early, although in a short term trade it could still pop from here back to the $40s rather easily on an upgrade or something.
    22 Jun, 07:06 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    You are wise.
    22 Jun, 08:19 PM Reply Like
  • Brad Castro
    , contributor
    Comments (1284) | Send Message
     
    Holy Cow, Gustavo!

     

    Amazing and substantive commentary - please comment on SA more . . .
    22 Jun, 10:18 PM Reply Like
  • Fluffer
    , contributor
    Comments (24) | Send Message
     
    What a coincidence the longtime former CEO Frankfort decided to retire just before the do-do hit the fan. I guess he's just lucky in his timing. I wonder if he was as lucky in unloading his stake in the company? :)
    20 Jun, 02:58 AM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    He didnt unload troll. He owns 2 million shares still. Nice try.
    20 Jun, 04:12 AM Reply Like
  • Fluffer
    , contributor
    Comments (24) | Send Message
     
    I think he used own over 3 million, maybe 5 million. Does he even report any more since he is no longer CEO? Anyways, maybe he sold you some of his shares. Smart money guys like you like to be on the other side of management sales. :)
    20 Jun, 06:02 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (829) | Send Message
     
    He actually bought a million dollars of the stock on the open market in the last few months of last year. Must be nice to make comments without a shred of knowledge of what you are talking about.
    22 Jun, 08:21 PM Reply Like
  • Jay S
    , contributor
    Comments (95) | Send Message
     
    Retail is tough no one knows what the next fashion hit will be but the one thing a good retailer always does is protect the brand i.e. Tiffany. COH seems to have failed to do that with too much sold in discount stores. Still it has a strong balance sheet and may come back. Stranger things have happened.
    20 Jun, 07:37 AM Reply Like
  • Charles Moscoe
    , contributor
    Comments (1361) | Send Message
     
    Agreed. The effects of channel stuffing and discounting takes years and years to reverse, and may never reverse with a luxury brand. Who is going to pay $500-$1000 for a purse again when the net is littered with them for $100-$200 and will likely be for quite some time. Its a retail shell game and Coach played it well for as long as they could. I just don't think the premium shoppers will come back to this brand.
    22 Jun, 07:02 PM Reply Like
  • chopchop0
    , contributor
    Comments (3138) | Send Message
     
    "Agreed. The effects of channel stuffing and discounting takes years and years to reverse, and may never reverse with a luxury brand. Who is going to pay $500-$1000 for a purse again when the net is littered with them for $100-$200 and will likely be for quite some time. Its a retail shell game and Coach played it well for as long as they could. I just don't think the premium shoppers will come back to this brand."

     

    Exactly. The tale of TIF vs COH charts shows this quite well the last several years. TIF didn't cheapen itself and dress down for the masses.
    22 Jun, 11:39 PM Reply Like
  • Long Term Value
    , contributor
    Comments (171) | Send Message
     
    It will take time. I went to their factory store in Napa Valley two days ago. beautiful store. Looked exactly like the "remodel" photo shown at the analyst day. As i walked in the clerk gave me a coupon for 50% off my purchases, including clearance.

     

    The store had customers, which is a lot different than the full price stores in the SF bay area.

     

    The merchandise shows the mistake Coach made. In simple terms, if you were going to make a "fake" Coach bag, you would make this stuff. Quality is not great, design follows the full price styles but the workmanship is similar to a bag you might buy in Target (or worse). These goods are specifically made for factory stores, they were never sold in regular stores.

     

    So they have really created their own monster. People are buying these bags, at the lower prices, and the brand is suffering for it. This is not a luxury brand and it will be very hard for Coach to wean off the highly profitable factory sales in order to build up their brand image.

     

    I can see owning Coach, but am in NO rush. Far better to observe their cash burn needs and judge the rate of improvement in brand equity.

     

    A smart thing they are doing is installing Coach paid sales reps in stores like Macy's. kors has been doing this right along and getting great results.
    24 Jun, 02:14 PM Reply Like
  • Intangible Valuation
    , contributor
    Comments (612) | Send Message
     
    Well said LTV
    24 Jun, 03:49 PM Reply Like
  • Charles Moscoe
    , contributor
    Comments (1361) | Send Message
     
    I love contrarian plays as much as the next guy and have made a career around picking dogs, but don't forget that this was a $2 stock a little over 10 years ago. It simply has not fallen enough given the fundamental shift in the brand performance (and image). I think its way too early to start talking about taking a position here as it is still nearer historic highs than lows.
    22 Jun, 06:58 PM Reply Like
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