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Coach's Turnaround Effort Is Still On Course

Summary

The handbag maker is sparking its sales by expanding more into clothing aiming for more upscale customers.

Coach is devoting more resources to strategic flagship stores boosting its presence and buzz in luxury circles.

Investors may want to consider the shares while its still relatively cheap.

Coach, (COH : NYSE) a luxury-goods maker best known for its signature handbags, has continued to drive its turnaround efforts towards a greater market share for its shareholders. The company is also expanding into clothing and aiming for more upscale customers through its recent acquisitions.

Investors may want to consider buying into the company at its current price of 38.57 per share as at Monday close. When you compare the stock with the S&P 500, the stock trades at a 15.74 times estimated earnings while the index trades at 19.70 times 12 months reported earnings. On a peer to peer comparison basis, rival Michael Kors (KORS : NASDAQ) trades at 18.24!

Coach recently declared a dividend of 1.35 per share (Ex dividend date 3 December 14) with a yield of 3.50 percent. This beats the yield of S&P 500 quoted companies with an average of 1.9 percent and peer KORS without any dividend.

As Coach increases its offerings of apparel and shoes, the company is buying Stuart Weitzman Holding LLC for about 530 million dollars in order to grow its business overseas and has introduced new lines designed by Stewart Verver, its creative director.

Verver's spring 2015 collection recieved a lot of positive buzz and good press from trade publication Fashionista. Coach is going upscale by reducing its discounts. The luxury goods maker has reduced flash sales to three per month from three per week. It is also closing seventy underperforming stores, rolling out new store design concept and devoting extra resources to its flagship stores. The company is also opening new luxury outlets in Beverly Hills, New York and Tokyo.

Despite Coach's poor fiscal first quarter which ended on September 27 2014, its positive turnaround efforts is beginning to gradually seep into the company's numbers. Coach's proven strategy of investing in stores to enhance sales through compelling pricing strategy, new merchandise assortments and a cost effective global sourcing model, should favorably impact its next quarter results.

I expect the company to beat expectations when it reports earnings this January 28 2015.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.