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How Did Coach Perform in 4Q16?

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Price movement

Coach (COH) fell by 6.4% and closed at $39.33 per share during the second week of August 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -6.4%, -6.8%, and 22.3%, respectively, as of August 12. Coach is trading 6.9% below its 20-day moving average, 3.3% below its 50-day moving average, and 7.5% above its 200-day moving average.

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Related ETF and peers

The ALPS Sector Dividend Dogs ETF (SDOG) invests 2.0% of its holdings in Coach. SDOG tracks an equal-weighted index of the five highest-yielding S&P 500 securities in each sector. SDOG’s YTD price movement was 19.4% on August 12.

The market caps of Coach’s competitors are as follows:

  • Estee Lauder (EL) – $34.2 billion
  • Ralph Lauren (RL) – $9.0 billion
  • Michael Kors Holdings (KORS) – $8.7 billion

Coach’s rating

Bank of America/Merrill Lynch upgraded Coach’s rating to “neutral” from “underperform.”

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Performance in fiscal 4Q16 and 2016

Coach reported fiscal 4Q16 net sales of $1.2 billion—a rise of 20.0% compared to net sales of $1.0 billion in fiscal 4Q15. The company’s gross profit margin fell by 1.0% in fiscal 4Q16—compared to the same period last year.

Its net income and EPS (earnings per share) rose to $81.5 million and $0.29, respectively, in fiscal 4Q16—compared to $11.7 million and $0.04, respectively, in fiscal 4Q15. It reported adjusted EPS of $0.45 in fiscal 4Q16—a rise of 45.2% compared to fiscal 4Q15.

Fiscal 2016 results

In fiscal 2016, Coach reported net sales of $4.5 billion—a rise of 7.1% YoY (year-over-year). The company’s gross profit margin fell by 0.23% and its operating income rose by 5.7% in fiscal 2016.

Its net income and EPS rose to $460.5 million and $1.65, respectively, in fiscal 2016—compared to $402.4 million and $1.45, respectively, in fiscal 2015.

Coach’s cash, cash equivalents, and short-term investments and inventories fell by 13.3% and 5.3%, respectively, in fiscal 2016. Its current ratio and debt-to-equity ratio fell to 2.6x and 0.82x, respectively, in fiscal 2016—compared to 3.0x and 0.87x, respectively, in fiscal 2015.

Projections

The company made the following projections for fiscal 2017:

  • revenue growth in the low-to-mid single digits—this includes the benefit from foreign currency of ~1.0%–1.5%.
  • operating margin of 18.5%–19.0%
  • interest expense of ~$25 million
  • the tax rate of ~28%
  • double-digit net income growth
  • double-digit EPS growth

For ongoing analysis of this sector, visit Market Realist’s Consumer Discretionary page.

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