Sell Coach (COH)
Bad news for the entire luxury retail sector from Tiffany & Co. (TIF) yesterday in the company’s update of holiday sales.
I’d look to cut my short-term exposure to the sector—and that includes shares of companies such as Coach (COH) that aren’t luxury retailers in the United States but are in their fastest growing market, China.
As of today January 11, I’m selling Coach out of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ with a gain of 80.47% since I added to that portfolio on November 20, 2009.
At Tiffany same-store sales in the first two months of the fourth quarter—adjusted for currency—fell by 4% in Europe and grew by a meager 2% in North America. That compares to 6% growth in Europe and 15% in North America in the third quarter.
Disappointing but nothing unexpected in sales numbers from these two regions. Sales growth had been expected to slow and sales in Europe had been expected to decline.
The surprise, and the reason I’d lighten up on the whole sector right now, came from Asia. Read more
Retail sales tomorrow (for October) will tell us how strong the holiday shopping season will be
Looking for a mover in a market that seems to have gone to sleep? (Volume on the New York Stock Exchange as of 2:20 p.m. New York time is just 378 million shares. Average volume over the last 10 days has been 902 million.)
How about the October retail sales that get announced tomorrow, Tuesday, November 15, before the New York market opens?
The big pop in September retail sales—up 1.1% from August—was a major factor contributing to optimism about U.S. economic growth. Not only have the projected odds of a U.S. double-dip recession in the next 12 months dropped back to 25% in the November Wall Street Journal poll of 52 private sector economists from 33% in the September survey. But also there’s a growing suspicion that U.S. economic growth in the fourth quarter will hold above 2%. The Blue Chip Economic Indicators poll of economists, for example, most recently projected 2.3% growth.
That would be down from the 2.5% growth in the third quarter, but way above the 1.3% in the second quarter and certainly nothing like the double-dip recession so feared in August and September.
The likelihood is that tomorrow’s retail sales numbers won’t be as strong as September—which got a boost from back to school shopping—but should still show solid growth heading into the holiday shopping season Read more
Update Coach (COH)
As my grandmother used to say, “Build a better cookie cutter and the world will beat a path to your door.”
Coach has done just that. The company developed a successful strategy for going overseas when it built a business in Japan from its U.S. base. Coach now holds a 16% share of a market that counts for 40% of the global market for luxury handbags. (Coach has 20% of the U.S. market, Standard & Poor’s estimates.)
And now the company is applying the same strategy to China. S&P estimates that the company holds about 4% of the Chinese market for luxury handbags. I think you can see where the company thinks this story is headed. As of the end of the fiscal third quarter that ended on April 2, 2011, Coach had 344 retail and 134 factory stores in North America, 174 stores in Japan, and 55 in China.
Of course, a company still has to execute that strategy. For the fiscal third quarter, announced on April 26, Coach reported earnings of 62 cents a share, 2 cents a share above the Wall Street forecast. Read more
Update Coach (COH)
Coach (COH) has successfully gone global. I think that’s the message in the September quarter results reported on October 26.
The company ended its June fiscal 2010 year with 20% of the U.S. handbag market and a 16% market share in Japan. Sales doubled to $100 million in China (where the company has a 4% share of the accessories market) and the company began to increase its penetration of the United Kingdom and continental European markets.
In the September quarter (the first quarter of the company’s 2011 fiscal year) the company reaped early returns from that strategy and continued to push its global strategy.
For the September quarter the company reported earnings of 63 cents a share, beating the Wall Street analyst consensus by 8 cents a share. Earnings per share grew by 43% from the first quarter of fiscal 2010. Revenue came in at $912 million, up almost 20% from the first quarter of fiscal 2010 and well ahead of analyst expectations for $847 million.
The company finished the quarter with 345 retail and 128 factory-outlet stores in North America, 169 stores in Japan, and 49 stores in China. Read more
Update Coach (COH)
Looking for signs that the global consumer is back? You’ll find them in the third quarter fiscal 2010 earnings that Coach (COH) reported before the stock market opened on April 20.
The company announced earnings of 50 cents a share, 4 cents a share above Wall Street expectations, on revenue of $830.7 million. Wall Street had been projecting revenue of $811.5 million. Revenue grew by 12.3% from the third quarter of fiscal 2009. Gross margin climbed to 74.1% from 70.96% in the third quarter of fiscal 2009. Wall Street analysts had estimated margins at 72.53% for the quarter. The gross margin for the third quarter just about matches the 74.2% gross margin in the second quarter. To me it’s clear that Coach’s revamped product line and aggressive efforts to cut costs in its manufacturing system have paid off—and are sustainable.
The better than projected results came from both existing and new stores. Read more
