Ride the Coach to China
Luxury retailer Coach plans to open 30 new locations in China in the next year.
Growth in North America is back, the company announced in a fiscal fourth-quarter earnings report released before the New York Stock Exchange opened Tuesday.
Adjusting for the extra week in the fourth quarter of fiscal 2010 (ending June) versus the fourth quarter of fiscal 2009, North American same-store sales climbed 6.3%. That let the company's strict cost cutting and China growth shine through in the earnings. (It also didn't hurt that on a constant currency basis, same-store sales climbed 6% in a tough Japanese economy.)
The company reported June quarter earnings of 64 cents a share, 8 cents a share better than the 56 cents expected by Wall Street.
Earnings in the fourth quarter of fiscal 2009 were 45 cents a share, so year-to-year earnings growth in the just-ended quarter was 42%. Revenue climbed by 22% to $951 million, well above the $889 million consensus estimate for the quarter.
Fiscal 2010 marked the first full year for Coach of directly operating its own stores in China. (Previously the company had operated through a joint venture partner.) Sales in China doubled in the year.
Obviously that was off a relatively small base, but the company did see same-store sales in China grow at a double-digit rate. For fiscal 2011, the company plans to expand its China footprint to include the same mix of retail stores, shops in department stores, and flagship retail stores that characterize its operations in North America and Japan. Coach said it expects to accelerate its store openings in China to 30 new locations in fiscal 2011.
The company is also pushing ahead with two other growth opportunities: its first standalone Coach stores for men and an entry into Western Europe.
But as the company emphasized in its earnings announcement, China is Coach's biggest growth opportunity. And on the basis of this quarter, the company remains, in my opinion, one of the best ways to invest in China's growing middle-class consumer economy.
As of Aug. 9, I'm raising my target price to $51 a share by March 2011 from $48 by October 2010. (It traded above $39 Monday afternoon.)
At the time of this writing, Jim Jubak didn't own shares of any company mentioned in this post.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Deals are the real worry, because they are the true measure of euphoria, which causes people to lose more money than just about any other emotion known to man.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.