In this era of the 'frugal consumer' -- characterized by stagnant median incomes, difficult labor market conditions, and an uncertain economic recovery timetable -- most investors agree the retail sector is best avoid. But there are exceptions to the rule for investors who can tolerate moderate risk, and Coach (NYSE: COH) is one.
Coach, a leading designer and marketer of high-quality accessories, has identified and helped define a lucrative and promising niche: 'accessible luxury.' In general, analysts expect current store traffic weakness to be offset longer-term by increasingly attractive price points and product introductions. The First Call F2009 / F2010 EPS estimates for COH are $1.86 / $1.71.
Other strengths: Productivity is impressive, and the company basically cut in half its F2010 expansion plan as a defensive strategy to cope with these challenging economic times. However, look for Coach to resume its full expansion plan (roughly 40-45 new U.S. stores, 10 new Japan stores annually) after the market starts to work its magic and economic growth resumes.
Stock Analysis: Coach is a moderate-risk stock. Consider buying a 25% position in COH now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your COH position in the first half of 2009. Sell / Stop Loss if you were to buy shares in this company: $8.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
Entrepreneur's Journal: Putting together a solid sales contract
The week in preview: Earnings from Walmart, Macy's, and other retailers
Six top trades for the rest of 2009
Reader Comments (Page 1 of 1)
4-15-2009 @ 1:10PM
Iridium said...
Coach is the biggest ripoff in consumer products. Gullible idiots happily fork over $200-800 for a "hand crafted" leather bag made in China for around $15-20.
The craftsmanship of a Coach bag is very good but they are made in the same factories that make $25 bags for Target.
Coach could do the world a favor and go out of business.
4-16-2009 @ 12:31PM
samthewill said...
most of my wealthy friends at affluence.org have tried to buy Coach for their wives- but they just won't have it haha. maybe if things get worse they will settle