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Coach: CLSA and Atlantic Equities Downgraded Its Rating

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Price movement

Coach (COH) has a market cap of $10.1 billion. It fell 1.3% and closed at $36.26 per share on January 25, 2017. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 2.6%, 5.9%, and 3.5%, respectively, on the same day. Coach is trading 2.7% above its 20-day moving average, 0.25% below its 50-day moving average, and 3.9% 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. SDOG’s YTD price movement was 3.0% on January 25.

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

  • Estee Lauder (EL) – $29.8 billion
  • Ralph Lauren (RL) – $7.4 billion
  • Michael Kors Holdings (KORS) – $7.0 billion

Latest news on Coach

On January 25, 2017, CLSA downgraded Coach’s rating to “outperform” from “buy.”

Atlantic Equities downgraded Coach’s rating to “neutral” from “overweight.”

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Coach’s performance in fiscal 1Q17

Coach reported fiscal 1Q17 net sales of $1.04 billion—a rise of 0.71% compared to $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 by 130 basis points and 230 basis points, respectively, between fiscal 1Q16 and fiscal 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 to $96.4 million and $0.35, respectively, in fiscal 1Q16. It reported adjusted EPS of $0.45 in fiscal 1Q17—a rise of 9.8% compared to fiscal 1Q16.

Coach’s cash, cash equivalents, and short-term investments rose 16.2%, while its inventories rose 19.1% between fiscal 4Q16 and fiscal 1Q17.

Projections

Coach made the following projections for fiscal 2017:

  • revenue growth in the low to mid-single digits, including a benefit from foreign currency of ~1.0%–1.5%
  • operating margin of 18.5%–19.0%
  • interest expense of ~$25.0 million
  • tax rate of ~28.0%
  • double-digit net income and EPS growth

Next, we’ll look at Kate Spade & Company (KATE).

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