Coach steps into shoes
The luxury accessories retailer has begun a successful transition into footwear and other fashion items.
By Geoffrey Seiler, BullMarket.com
For its latest quarter, Coach (COH) posted a profit of $238.9 million, or 84 cents per share, compared with $225.0 million, or 77 cents a share, a year earlier. While the company is known for its handbags, its first quarter was all about shoes.
The results topped Wall Street forecasts by 4 cents per share. Revenue rose 7% to $1.19 billion, just ahead of the $1.18 billion Wall Street consensus.
The company's conference call certainly confirmed that shoes were selling well. North American Retail President Michael Tucci said, "In March, we relaunched shoes in 170 retail stores in North America."
Tucci explained, "The response from consumers has been extremely positive as the business in these footwear locations went from about 3% to almost 12% of the business."
This is important because that it is solid evidence that the company can transform itself into a full-fledged lifestyle brand and not be solely reliant on handbags, where it has been losing some market share.
Given this, we would be more bullish on Coach despite the big jump in the stock price following the quarterly report.
The stock is still cheap and well off its highs, and if the company can successfully move beyond handbags and into shoes and other fashion areas, then it's looking at a much bigger addressable market, paving the way for a lot of potential growth.
It's still early, but the initial evidence is signaling that the Coach brand is strong enough to make this transition.
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The company is scrambling to protect its equities arm, which could face declining volume and revenue as competitors close the gap.
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