Seeking Alpha

Doubts linger about the new Coach

  • Shares of Coach (COH) are still under pressure as investors weigh the company's plan to transition into a lifestyle apparel seller.
  • Analysts see a hit to the brand as outlet sales and promotions become a bigger part of the equation.
  • Execution with new men's and women's lines needs to be spot-on to turn Coach into a turnaround story, according to retail insiders.
  • COH -1.2% premarket after a 8.9% swoon yesterday.
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Comments (19)
  • Willow Street Investments
    , contributor
    Comments (1156) | Send Message
     
    Analysts are wrong. Discounting is being decreased.

     

    My conclusion:

     

    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 2014, 08:33 AM Reply Like
  • NY2LA 1
    , contributor
    Comments (551) | Send Message
     
    Share turnover the past month or so is very high, 6 month floor should be near if not today. It will give us trading room thru the holidays, best of luck Coh longs. Stick it out.
    20 Jun 2014, 08:42 AM Reply Like
  • Willow Street Investments
    , contributor
    Comments (1156) | Send Message
     
    Thanks. See above. Top management saw these problems and already have a great plan in place to address the problems. Dividend seems safe in worst case scenarios.
    20 Jun 2014, 08:49 AM Reply Like
  • student23
    , contributor
    Comments (88) | Send Message
     
    So I'm guessing now at $35 you think it's probably bottomed and it's a buy? What if it breaks 35 and goes slowly to $30 ? Wouldn't be wise to stay on the sidelines until further notice?
    20 Jun 2014, 09:19 AM Reply Like
  • Willow Street Investments
    , contributor
    Comments (1156) | Send Message
     
    There will be no obvious sign to buy a stock especially when that is working through its troubles. No one can predict a bottom of any stock in this position. Stocks can get too cheap or too expensive.
    20 Jun 2014, 09:24 AM Reply Like
  • Fanebrb
    , contributor
    Comments (615) | Send Message
     
    Sell Calls every 2 weeks. That's better than ANY dividend... ha! I'm do'in it! After 5-7 years... well Wow!
    20 Jun 2014, 10:36 AM Reply Like
  • Willow Street Investments
    , contributor
    Comments (1156) | Send Message
     
    In 5-7 years you will be old enough to buy beer too.
    20 Jun 2014, 10:45 AM Reply Like
  • Investing Doc
    , contributor
    Comments (819) | Send Message
     
    Bought yesterday around $35, and will look to add more if we get below $32. Morningstar quotes a FVE of $50, Finviz PT $46, and running a Monte Carlo DCF analysis based on historical trends suggests a FVE in the $46-53 range. Reverse DCF at today's price suggests a 10-year 0% growth rate, something which seems highly unlikely, even if there has been some damage to the brand. I'm comfortable getting paid a 3+% dividend yield to wait for the turnaround over the next year or so.
    20 Jun 2014, 01:55 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (1156) | Send Message
     
    I bought too early ... 48-39 but I believe you are right. FY 2015 i starting in 2 weeks...by the end of this year we will be 6 months away from the end of FY 2015 and thebginning of revenue growth if all goes to plan.

     

    I would like to see the insiders buy some stock here to make me feel better.
    20 Jun 2014, 02:08 PM Reply Like
  • akgoldbe
    , contributor
    Comments (2) | Send Message
     
    Listened to the investor call as well. Seemed like a bunch of hooplah. They are still denying that outlet is bringing the brand image down. They are the only ones denying it.

     

    I don't think they can turn around unless they decrease the penetration of outlet to the business. The customers who buy the full price stores do not want to be compared to those who buy the outlet. Not sure why COH management heads are the only ones not to recognize this.
    20 Jun 2014, 01:59 PM Reply Like
  • jlalbalos
    , contributor
    Comments (105) | Send Message
     
    They are decreasing in the discount area.
    20 Jun 2014, 02:19 PM Reply Like
  • #480948
    , contributor
    Comments (16) | Send Message
     
    At any given moment, analysts will be right and wrong about every company, but if you ignore what the market is saying at that moment, you do so at your own peril. There is no evidence that now is the time for increased hope that COH is or will turnaround. Take a look at the Aeropostale story - $32.00 to $3.35 in four years. Will Coach follow suit? I hope not, but there are no certainties in speculating are there. As for investing in COH, think instead about investing your money into CELG or GILD for four years. I do not see COH giving you anything like the return you will get there. Still, it is your money.
    20 Jun 2014, 03:45 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (1156) | Send Message
     
    Both those stocks you mentioned are very good companies but also at 52 week highs with high p/es. If I had bought them several years ago I would keep them but I dont buy stocks at 52 week highs.
    20 Jun 2014, 03:58 PM Reply Like
  • Aaron Leow
    , contributor
    Comments (35) | Send Message
     
    Aeropostale - different business environment altogether. Much lower gross profit margins. The business strategy to succeed is speed and operational efficiency (Wal-mart of fashion) rather than differentiation (Coach and Michael Kors).
    20 Jun 2014, 05:40 PM Reply Like
  • newnnly
    , contributor
    Comments (253) | Send Message
     
    And no dividend for either one of them.
    20 Jun 2014, 06:36 PM Reply Like
  • #480948
    , contributor
    Comments (16) | Send Message
     
    52 week highs are made to be broken. Solid companies do that. Once again, what reason/s do you have to expect that, contrasted with CELG or GILD, COH will provide a greater return in four years? And that more risk lies with CELG or GILD than with COH? At this moment in time, Coach is pure speculation. Cegine and Giliad, on the other hand are investments.
    21 Jun 2014, 03:06 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (1156) | Send Message
     
    Cant say that I agree.
    21 Jun 2014, 10:53 PM Reply Like
  • Investing Doc
    , contributor
    Comments (819) | Send Message
     
    Unless you are speculating that a stock that hit a 52-week high is going to continue to hit 52-week highs over the foreseeable future, buying a stock at a 52-week high seems like a fool's errand. I have owned both GILD and CELG, and I agree both are solid firms. But I prefer a larger margin of safety relative to what I perceive to be their fair valuations. In the case of COH, a highly conservative discounted cash flow model suggests a fair value in the $45 range. There would appear to be a margin of safety there, though of course, time will tell if my assumptions were too optimistic.
    22 Jun 2014, 06:24 PM Reply Like
  • ls1gto
    , contributor
    Comments (151) | Send Message
     
    My problem with coh is that they are past due on their dividend raise this year. Had they raised a dividend like tgt did, I would be a buyer. But they did not which leads me to believe that management is becoming cautious about long term future of the company. Without an increase they are no longer a DG stock. I will continue to hold my small position but not adding at this time.
    20 Jun 2014, 07:08 PM Reply Like
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