Okay, put your hand up if you like the idea of investing in retailers that base their shareholder value on fashion trends? Just as I thought. And while a lack of interest might be a contrarian indicator in some cases, I don't think it is in this case. Let's take Coach (NYSE: COH) as an example. The company reported Q2 earnings on Wednesday. As one might expect, they were weak and unattractive, the exact opposite of one of those Coach bags. Sales were down 2%, and earnings per diluted share were down 3% to $0.67, which this source says met expectations.
I'll give ample credit to Coach for meeting expectations. That's not easy to do given its business model, especially since Christmas was not kind to any of the malls across the country. There's not much Coach can do to thrive. The press release talks about keeping innovation strong, and about offering new collections, and about strong growth opportunities over in China. It's all meaningless. That previously cited source speaks of Coach's plans to cut prices and reduce expansion strategies. Coach is simply in defensive mode, it can do precious little to get traffic in its stores because consumers are reticent to spend. Actually, that last point will probably go down as one of the biggest understatements ever offered up in the history of financial commentary.
I wish Coach the best, and hope its innovation ambitions focus on marketing as opposed to just merchandising in the stores (I think many retailers forget that marketing is key). Now, were you thinking of picking up some Coach shares on weakness? According to this item on analyst opinion, Coach could be a prime candidate for capital appreciation based on its valuation. Sure, Coach could be cheap. But market sentiment oftentimes could care less. The retailer isn't far from its 52-week low, and I've got to believe it will fall below that level considering sentiment, both on the part of investors and consumers. There's just way too much uncertainty here, even though the company arguably has a strong brand in its category. I'd much rather look at a Target (NYSE: TGT) or a Wal-Mart (NYSE: WMT) instead of a Coach.
Visit AOL Money & Finance for more earnings coverage.
Disclosure: I don't own any company mentioned; positions can change without notice.
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