coach company analysis

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1、ScottAsterFinance573:CoachIncSellReport3/1/2010Sector:ConsumerDiscretionaryIndustry:Apparel&FootwearCoachCompanyAnalysisRecommendation:SellCoachThecurrentrecessionaryenvironmenthashadastrongnegativeimpactonindividualincomelevels,consumerspendingandconsumercred

2、itavailability.AsaproducerofhighpricedluxurygoodsCoachstandstosufferfromthestateoftheeconomyasconspicuousconsumptionisfrowneduponandconsumerfrugalityisinfashion.ThesearefactorsthatsignificantlyimpactCoach’sfinancialoutlookasthecompanyhasexperienceddeclinesinbo

3、thsamestoresalesaswellasearningsfromfiscal2008tofiscal2009.Coach’sgrossmarginsarealsoshrinkingasthecompanyhashadtoincreasinglyrelyuponitsfactoryoutletstorestosellitsproductsCoachInc,2009AnnualReport:22..Thisalsopresentstheproblemofbranddilution.Fromavaluationp

4、erspectiveCoach’sP/Eratio,currentlyat18.23,iswellabovetheapparelindustryaverageof3.26,whichsuggeststhatfromarelativevaluationperspectivethecompanymaybeoverpricedReuters/COH.http://www.reuters.com/finance/stocks/overview?symbol=COH.N.Furthermore,theDCFanalysisi

5、ndicatesanintrinsicvalueofapproximately$35.00whilethecurrentsharepriceis$38.27(3/11/10close).Basedonthisquantitativedatathestockiscurrentlyoverpricedandhasverylittleupwardpotentialwithinourinvestmenthorizon.Thestock’spricehasincreasedover200%inthepastyearandha

6、sbeenfluctuatingbetween$34.00and$37.00sinceOctober(pleaseseeAppendix1).Thealphafromthisstockwasfullyextractedin2009andtheCoachholdingshaveruntheircourse.Theintentofthisreportistoillustratethatbasedonacombinationofqualitativeandquantitativefactorsthisstockiscur

7、rentlyovervaluedanditispreferabletosellCoachandseekanotherstocktoreplaceitsvalue.CompanyOverviewCoachInc.specializesintheproductionofpremiumlifestyleaccessoriesandisoneofthemostrecognizableluxurybrandsinboththeUnitedStatesandJapan.Thecompanyprovidesinnovativea

8、ndfashionableproductsatrelativelyattractiveprices.Coach’sproductlineconsistsofhandbags(64%),accessories(28%)andother(8%)productsincludingfootwear,jewelry,briefcases,etc(pleaseseeAp