QUOTE AND NEWS
SeekingAlpha  Oct 17  Comment 
By Benjamin Clark: Coach Inc. (NYSE:COH) has been beaten down by Mr. Market over the last few years, but value investors are keen to understand that the market's behavior does not indicate whether a company is a good investment. Rather, Benjamin...
SeekingAlpha  Oct 15  Comment 
By Nelson Alves: The Fashion Puzzle Recently, I've started to deeply research Coach Inc. (NYSE:COH). Initially, I thought: "It's just another stock. I just have to see it through." However, the fashion business has its own idiosyncrasies. We...
Market Intelligence Center  Oct 15  Comment 
Coach Inc. (COH) is a good candidate for a covered call at the $35.00 level. The Jan. '15 call at that price should fetch a credit of about $2.65, which means the entire position has a net debit of about $32.97. This trade has 5.25% downside...
SeekingAlpha  Oct 14  Comment 
By Willow Street Investments: In October 2014, Coach (NYSE:COH) announced that characters from the Peanuts comic strip created by the late Charles Schulz will be the first theme in a series of limited edition projects. The products will initially...
Market Intelligence Center  Oct 14  Comment 
The option-trade picking algorithms behind MarketIntelligenceCenter.com's Artifical Intelligence Center have selected a covered-call trade on Coach Inc. (COH) that includes 6.45% downside protection. Sell one contract of the Jan. '15 $34.00 call...
SeekingAlpha  Oct 7  Comment 
By Joshua Chin: Investors should go long Coach Inc. (NYSE:COH), as it is a compelling LBO target that would generate a private equity firm at least 30% IRR over 5 years. At its current prices and assumed guidance, the downside for Coach is limited...
TheStreet.com  Oct 3  Comment 
NEW YORK (TheStreet) -- Shares of Coach Inc are down 0.48% to $35.04 in early market trading after the handbags and accessories company received a negative note by analysts at Goldman Sachs, and had its full year estimates lowered below the...
Market Intelligence Center  Oct 1  Comment 
The patented options-trade picking algorithms used by MarketIntelligenceCenter.com found a trading opportunity with Coach Inc. (COH) that should provide a 4.14% return in just 52 days. Sell one Nov. '14 call at the $35.00 level for each 100 shares...
Market Intelligence Center  Sep 30  Comment 
The patented options-trade picking algorithms used by MarketIntelligenceCenter.com found a trading opportunity with Coach Inc. (COH) that should provide a 4.62% return in just 53 days. Sell one Nov. '14 call at the $36.00 level for each 100 shares...
SeekingAlpha  Sep 26  Comment 
By Tom Armistead: I bought into Coach (NYSE:COH) at $54.03, and have watched it decline to as low as $33.39. Not good. My initial analysis, when the bad news started arriving, was that there was no point in making a decision until the success of...




 

Coach Inc. (NYSE: COH) is a leading retailer of premium handbags and accessories, located primarily in North America and has recently expanded into Asian markets. Basing its image on "affordable luxury," Coach seeks to establish a premium brand that caters to affluent consumers but also provides lower-priced goods to appeal to the demand of middle-class customers.

Due to its effective merchandising and brand-building, Coach has boasted high operating margins and increasing popularity within the U.S. and Japan for years, even in the suffering American economy. COH also intends to take advantage of increasing luxury consumption in China by taking more control of its retail operations there and building its own stores instead of relying on third-party retailers. As COH continues to develop its ultra-luxury collections, it will share in the recent increase in spending in luxury good markets as the affluent release pent-up spending power from the last year. [1]

Business Overview

Coach is a leading American manufacturer and retailer of leather goods, accessories and apparel for men and women. Coach occupies the affordable luxury segment, which provides high-end merchandise for both high and middle-income consumers. For example, prices for a Coach handbag can range from $298 to $6,000.[2]


Business Segments

Coach is divided into three main revenue segments:

  • Handbags (63% of net sales): There are usually 3 - 4 collections per quarter and 4 - 7 styles per collection. These collections feature classic and fashion designs.
  • Accessories (28% of net sales): These include small leather goods, novelty accessories, and belts.
  • Other products (9% of net sales): These include footwear, business cases, jewelry, wearables, sunwear, travel bags, fragrance, and watches.[3]

Trends and Forces

Coach Seeks to Take Advantage of China's Growing Affluent Class

Coach has primarily stayed focused in North America and Japan. However, China is becoming an increasingly important market for luxury retailers. The rise of China's middle class has led to an increase in disposable income and thus an increase in potential customers. China spends more than $2 billion a year on luxury products.[4] What this means is that there is a growing affluent class in China that is capable of purchasing Coach products across all price points.

Luxury Image Essential for Sales

As with any luxury or affordable luxury retailer, Coach heavily relies on an image of exclusivity to fuel interest and sales of its products. A luxury company can lose its "luxury" status if the brand becomes too popular or too accessible. Coach thus takes a risk by having factory stores that sell discounted merchandise. None of Coach's competitors, such as Louis Vuitton and Gucci, have factory stores--they would be in direct opposition to the air of exclusivity the brands seek to cultivate. However, Coach protects its luxury status by placing its factory stores at least 60 miles away from its full-price locations.[5] In addition, the factory stores never sell the latest merchandise--they sell last year's or irregular pieces in addition to products that are manufactured specifically for the factory store. Coach never has sales at its full-price stores and does not allow retailers such as Macy's Inc. (M) to discount its merchandise. The result of these actions is that the factory stores and flagship locations serve two different demographics and are separate enough that the factory segment does not tarnish the overall image of the brand.[5]

Competition

Most of Coach's closest competitors are either privately owned or owned by larger European conglomerates of various luxury brands. Consequently, comparative data is unavailable. This includes Louis Vuitton and Fendi, both owned by LVMH Moet Hennessy L.V. (LVMUY), and Gucci Group.

Coach's business model is chiefly distinguished by its stress on "accessible luxury." This model thus reaches a larger demographic compared to many of Coach's higher-priced competitors, including Louis Vuitton, Gucci, and Prada. These competitors tend to focus on a higher income, high-fashion demographic. Companies like Dooney & Burke and Cole Haan also stress "accessible luxury" and are Coach's most successful competitors; however, Coach's market share has continued to increase in their presence.


References

  1. Luxury Spending Sees a Boost
  2. Coach website
  3. http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDE1NzM1fENoaWxkSUQ9NDI3ODU1fFR5cGU9MQ==&t=1
  4. Joseph Chaney. Handbag brand Coach plans major expansion in China..
  5. 5.0 5.1 Coach's Split Personality.
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