Has Coach's stock peaked?

The handbag maker reports its strongest sales in more than 2 years, but will the company plateau?

By TheStreet Staff Oct 26, 2010 10:26AM

thestreetBy Jeanine Poggi, TheStreet

 

Credit: © Daniel Acker/Bloomberg/Getty Images
Caption: A Coach handbag sits on display in the Coach flagship storeCoach (COH) reported third-quarter earnings and revenue that handily topped expectations. But the numbers may leave investors wondering: Has the handbag maker reached its peak?

 

During the quarter, the company earned $188.9 million, or 63 cents a share, a 34% surge from $140.8 million, or 44 cents, a year ago. Analysts predicted a profit of 55 cents a share for Coach.

 

Coach's revenue jumped 20% to $911.7 million, also above estimates of $846.8 million. North American sales at stores opened at least a year grew 8.5%, the biggest gain since the fourth quarter of 2008. The same measure rose 3% in Japan and by double digits in China.

 

Comparable sales have strengthened for three consecutive quarters as consumers are being wooed by lower-priced handbags.

This marks Coach's strongest sales and earnings performance in more than two years. But the company did not provide fiscal 2011 guidance, which may cause investors to remain cautious.

 

Still, Wall Street Strategies analyst Brian Sozzi says today's report could also be viewed as a sign of what's to come as international sales begin to dominate a slower U.S. growth story. Coach continues to make an aggressive push in China, with plans to open 30 stores in 2011.

 

The company also attributed some of the gains to significant growth in shipments to department stores ahead of the holiday quarter and lower sourcing costs.

 

Coach's earnings signaled good news for the department store sector as well. Macy's (M) and Nordstrom (JWN) are positioned to benefit the most, as both sell Coach handbags and accessories.

 

Related Articles

0Comments

DATA PROVIDERS

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.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

113
113 rated 1
279
279 rated 2
416
416 rated 3
647
647 rated 4
548
548 rated 5
513
513 rated 6
669
669 rated 7
516
516 rated 8
317
317 rated 9
113
113 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
KOGKODIAK OIL & GAS Corp10
UPLULTRA PETROLEUM Corp10
TAT&T Inc9
COPCONOCOPHILLIPS9
DVNDEVON ENERGY CORPORATION9
More

VIDEO ON MSN MONEY

ABOUT

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.