Coach (COH) is having a tought time nowadays. Sales didn’t grow last quarter for the first time since I-don’t-know-when (I’ve owned/covered this company for more than a decade now). Micheal Kors is kicking Coach in the balls, and things continue to look worse every single quarter. Same store sales dropped 7% last quarter, and profit margins fell because of more promotional sales. This brand has little going for it.
One Year Chart
Shares of Coach are sitting around 52-week lows, so this could be a good time to buy COH betting on the comeback. But what keeps me sceptical of a quick comeback is this stock doesn’t really have a low P/E. With all its troubles, this stock sould be selling at 10 to 12 times earnings. Annual estimates continue to fall and even if they stop falling and the stock follows suit, the stock is still a room-temperature value at 15 times earnings.
I need a discount to get into these shares, and even if I do I take on the risk that annual estimates continue to falter (bringing down the stock even more) and I would also have to devote client capital to a stock that could be a dog for a while.
Fair Value
I see this $51 stock being $52 in 2014. Annual estimates have to turn around for the stock to gain traction.
Sharek’s Take
Coach should be a decent value selling at its 52-week lows, but with a P/E of 15 I don’t feel COH is on sale at all. This company needs to get a better fashion to get momentum back again. Who want’s a Coach bag when you can have Michael Kors?
View the Earnings Table here. View the Profit History here.View the Ten Year Chart here.
