Thursday, July 18, 2013

Coach (COH) 2013 Review

Coach Inc (COH) designs, produces and markets high quality hand bags, business cases, luggage, leather outer wear and men’s and women’s accessories.  It also licenses watches, footwear, and home and office furniture.  The company has grown profits 30%+ annually for the last ten years earnings a 40%+ return on equity.  Its dividend has grown from $.08 in 2009 to an expected $1.30 in 2013. COH was not immune to the declines in consumer spending in 2007-2009; however, as the economy improved, it benefited from:

(1) improving comparable store sales and rising margins due to:

(a) product innovation,

(b) a market savvy pricing strategy,

(c) effective cost control program.

 (2) expansion into men’s products as well as internationally.

Negatives:

(1) it is in a highly competitive industry,

(2) its customer base is sensitive to economic conditions,

(3) fashion obsolescence.

COH is rated A by Value Line, has almost no debt (1%) and its stock yields 2.2%.

  Statistical Summary

                 Stock       Dividend         Payout      # Increases  
                 Yield      Growth Rate     Ratio       Since 2009

COH          2.2%          22%               36%               4
Ind Ave      0.8             7*                  25                NA 

                  Debt/                    EPS Down       Net        Value Line
                 Equity      ROE      Since 2002     Margin       Rating

COH           1%           44%             1               21%          A
Ind Ave      22             17               NA              7             NA

*many companies in COH’s industry do not pay a dividend

     Chart

            Note:  COH stock made good progress off its March 2009 low, quickly surpassing the downtrend off its April 2007 high (straight red line) and the November 2008 trading high (green line).  Late in 2012, the stock broke a long term uptrend (black lines) and re-set to an intermediate and long term trading range (purple lines).  The wiggly red line is the 50 day moving average.  The Aggressive Growth Portfolio owns a 50% position in COH.  The upper boundary of its Buy Value Range is $51; the lower boundary of its Sell Half Range is $117.





7/13

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