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Coach, down almost 16% this morning on weaker than expected sales in North America and a 2% decline in same store sales.
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Coach is in the midst of a transition - trying to reposition itself as a luxury lifestyle brand. They will be adding women's clothing, which would be a catalyst for growth on down the road.
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I am staying with it. I still have very nice profits on COH having mostly bought during the recession. Value Line and S&P are still positive. Strong Buy retained for the latter. I always thought COH was a classic brand somewhat immune to the whims of fashion. Will need to prove itself again before I would add.

sw
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Most believe that KORS has become a huge problem for them. IMO, that won't be the case over the long term as it's not an either or type of thing. With solid fundamentals, store growth and at a PE of 14, I added. The real risk is in them adding apparel. I plan to follow the transition closely.

cautiousone
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I also added a bit, but I have some concerns.

The men's line --including standalone men's stores-- is something I worried about a lot initially, and so I was surprised to see it's actually developing well (of course, I might not be the best judge of the market for high-end men's leather goods: my wallet cost, if memory serves, $4 at Wal-Mart about ten years ago).

One thing I like about Coach is that the accounting is honest; they treat their shareholders as adults. They could easily have made pricing adjustments to bring the sales numbers up to positive comps, but chose to stand firm on pricing and eat the negative comps. I don't have as much of a problem with the discount channel as some people, but I question the wisdom of putting Coach merchandise in department stores and making it susceptible to discounting there: it seems like the worst possible way to cannibalize sales.

Margins are my biggest worry going forward. Building out women's apparel will be costly, and I expect it will bring revenues/square foot down appreciably. That doesn't necessarily mean it's a bad decision. They seem to have committed to the strategy of organic growth through diworsification, rather than sticking with what they do best, making $300 handbags.

I have a lot of respect for Frankfort, but in the conference call he didn't have much to say in response to the analyst question about who the Coach consumer is, other than that she's intelligent. That's an adjective, not a lifestyle brand.
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robingstarveling,
I noted that he used future tense when referring to "the Coach woman." As the lifestyle concept is mainly marketing, I'm thinking we'll have that answer when we see their ad campaign.

Transition/Transformation...two years in the making, gradual rollout, new store look, right team, complete by the holiday.

...we have been working for the last two years on moving Coach from an accessories brand to a lifestyle brand. We started with a holistic approach to Men’s, which is running extremely strongly. We have moved forward with footwear. We’ve introduced new store prototypes. We have expanded our lifestyle categories with key items, particularly in outerwear, all of which demonstrate on consumers’ interest in Coach providing a more complete expression.

And based on the accumulation of variety of factors including having the right team in place on success with our initiatives, business process change and an articulation of who the Coach women will be through our lenses, we have now galvanized on this initiative. And you will see this holiday a complete expression of the Coach brand.


http://seekingalpha.com/article/1127391-coach-s-ceo-discusse...

I'm using Kors $1,383 sales/sf as a minimum and that's much lower than where they are now. Kors will not have the sophistication in retail systems that Coach has, so I'm thinking they won't get that low. Plus, they've got a slow rollout and enough established stores to adjust for impact, assuming that volume will absorb any fall-off. For me, I don't feel a diworsifaction type of thing at this point - look at Kors.

cautiousone
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but I question the wisdom of putting Coach merchandise in department stores and making it susceptible to discounting there: it seems like the worst possible way to cannibalize sales.

Discounted? Where, where? :-)
Over the years I've contributed mightily to the Coach bottom line, but I don't remember seeing discounted items in department stores.
Considering their strong balance sheet and propensity to return value to shareholders, I added Coach yesterday at around $51.30. No doubt this knife will fall further, but you have to jump in at some point. ($35 would have been ideal but probably not for a year or two :-))

Next: waiting for Tiffany to disappoint, but they don't report till March 22.
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Discounted? Where, where? :-)
Over the years I've contributed mightily to the Coach bottom line, but I don't remember seeing discounted items in department stores.


Macy's, for example:
http://www1.macys.com/shop/handbags-accessories/sale-clearan...

Dillard's, including all-leather Legacy items:
http://www.dillards.com/shop/COACH/Sale-Clearance/_/N-1738wZ...

Bloomingdale's:
http://www1.bloomingdales.com/shop/sale/handbags?id=5070#!fn...

Shoes, at Lord and Taylor:
http://www.lordandtaylor.com/shoes/coach-shoes.shtml
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Discounted? Where, where? :-)
Over the years I've contributed mightily to the Coach bottom line, but I don't remember seeing discounted items in department stores.



Macy's, for example:
http://www1.macys.com/shop/handbags-accessories/sale-clearan......

Dillard's, including all-leather Legacy items:
http://www.dillards.com/shop/COACH/Sale-Clearance/_/N-1738wZ......

Bloomingdale's:
http://www1.bloomingdales.com/shop/sale/handbags?id=5070#!fn......

Shoes, at Lord and Taylor:
http://www.lordandtaylor.com/shoes/coach-shoes.shtml


Quote from an expert:

"If it is a brand spanking new model, it will not be on clearance. If you see it on clearance on Macy's, that means a Vogue editor will turn up her nose at it because it is so last season. You will not see them on a runway or a magazine. My $675 golden purse was $195 the next year and you could get a 30% discount on that in Macy's."

I see three possibilities:
1. you're right and Coach is indeed cannibalizing sales.
2. Macy's first prints artificially inflated prices and then gives you a 25% discount on them. (I suspect strongly Kohl's does this.)
3. The expert is right. The department stores are discounting old inventory to move it out ("so last season".)
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If your "expert" thinks a Vogue editor would carry a Coach bag, this season's or last season's, he or she is anything but. Hermes, maybe.

Part of what's supposed to work to Coach's advantage is that the bags are contemporary but classic, and that a woman can carry them for several seasons without looking dated. The Legacy collection --Coach's flagship line-- was new. To see Legacy items on sale isn't a good sign.
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A year later, almost to the day.
Coach down 7% or so due to an earnings miss.
No debt, P/E ~ 14, 2.6% dividend and comparable buyback yield.
OTOH, it's an out-of-fashion retailer with very strong competition from KORS and the like.
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