Quick Thoughts On Coach
Posted on: January 29, 2009 - Email Article - Printable Version
Coach [COH: 38.27, -0.22 (-0.57%)] reported earnings on Wednesday, January 21. Before I touch on the tough quarter they had, I would like to say that I still like the American accessory maker. Now that investors beat it down some more since the release, along with the majority of the retail sector, I like it even more at around the 15 dollar range. I will get into why I am preaching this long term value play after I go through their Q2 earnings.Q2 Earnings
The company reported a profit of $216.91 million for their second quarter, down 14% compared to last year. On a per share basis, the company earned $0.67 per share compared with $0.69 a year ago. This number came in line with the average analyst estimate which was also $0.67 per share. This was the estimate Coach released earlier this month. 
If you would like to see the numbers you can look them up anywhere, basically Coach said it is right where everyone, including the company itself, expected them to be around this time. Investors may not be too fond of the fact that the company did not give guidance for the second half of 2009 due to the uncertain economic conditions, but it seems that this was in the company’s best interest. In regards to looking forward, it was cited that the company’s “financial strength” will afford it to look towards the longer term. The accessory maker also added that its solid balance sheet, which is essentially debt free, and significant cash position will allow the company to weather the storm quite well.
Put Some Eggs in a Coach Basket
You can dissect the earnings for last quarter yourself, but here is a quick run through as to why you can confidently put your money into Coach for the long term. Other than looking cheap at less than 8x price to earnings, the company has been repurchasing shares and plans to repurchase over $700 million more in 2009. Also, it is aggressively expanding into China over the next five years, as well as Japan where its market share is expected to grow by 15% through 2010. It is difficult to deny that there is some strength in the mountain of cash CEO Lew Frankfort mentioned several times when speaking of the most difficult holiday season in his “30-year tenure.” Once high-end consumer spending kicks in again, whether it be the second half of 2009, early 2010, or some later time, Coach is well positioned. It is difficult to deny that there is some value by getting in at this time. For the long term investor, who is looking for some appreciation in the next three to five years, COH is a good place to start (re)building a strong portfolio.
- Nestor Solari
Disclosure: None
The Following Stocks Were Mentioned In This Article: COH
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