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How Has Coach Performed in 1Q17?

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Price movement

Coach (COH) has a market cap of $10.3 billion. It rose 2.2% to close at $36.68 per share on November 1, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 2.9%, 0.38%, and 15.0%, respectively, on the same day. COH is trading 1.9% above its 20-day moving average, 0.01% below its 50-day moving average, and 3.5% below 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. The ETF tracks an equal-weighted index of the five highest-yielding S&P 500 securities in each sector. The YTD price movement of SDOG was 14.6% on November 1. The market caps of Coach’s competitors are as follows:

  • The Estée Lauder Companies (EL) — $31.8 billion
  • Michael Kors Holdings (KORS) — $8.5 billion
  • Ralph Lauren (RL) — $8.1 billion

Performance of Coach in fiscal 1Q17

Coach reported fiscal 1Q17 net sales of $1.04 billion, a rise of 0.71% over the net sales of $1.03 billion in fiscal 1Q16. A strategic decision in the North American wholesale channel impacted sales. The company’s gross profit margin and operating margin rose 130 basis points and 230 basis points, respectively, between 1Q16 and 1Q17. The gross margin includes the impact of currency headwinds.

The company’s net income and EPS (earnings per share) rose to $117.4 million and $0.42, respectively, in fiscal 1Q17, compared with $96.4 million and $0.35 in fiscal 1Q16. It reported adjusted EPS of $0.45 in fiscal 1Q17, a rise of 9.8% over fiscal 1Q16.

Coach’s cash, cash equivalents, and short-term investments rose 16.2%, and its inventories rose 19.1% between 4Q16 and 1Q17. Its current ratio rose to 3.6x, and its debt-to-equity ratio fell to 0.68x in fiscal 1Q17, compared with 2.6x and 0.82x, respectively, in fiscal 4Q16.

Projections

The company has made the following projections for fiscal 2017:

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

For an ongoing analysis of the consumer sector, please visit Market Realist’s Consumer Discretionary page.

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