This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Coach's Huge Earnings Problems Explained in 3 Photos

Stocks in this article: COH KORS KATE M SHLD

NEW YORK (TheStreet) -- Coach (COH) shares have plunged 40% in two year's time and may fall still further, based on first-hand observations of the brand inside major department stores. Discounts, closed displays and other problems are making it difficult for the company to expand sales and profits at these outlets.

In the past month alone, Coach's stock has shed 17.2%, compared to a 10.9% fall for rival Michael Kors (KORS), and a 1.5% rise for the renewed Kate Spade (KATE). Consider this: Coach's same-store sales, a key industry metric, have not increased since the quarter-ended April 23, 2013 (1% improvement realized). For the latest nine months of Coach's fiscal year, gross profit margins have evaporated to the tune of 244 basis points.

Michael Kors has delivered same-store sales increases of 22.9% to 36.7% over the past four quarters.  Same-store sales growth at Kate Spade has been even more impressive than Michael Kors.  In the most recent quarter, Kate Spade's same-store sales rose a whopping 43%, following increases of 30%, 31%, and 27%.

Video Interview Exclusive: Aboard its Ship, Norwegian Cruise Line CEO Talks About the Future

Video Interview Exclusive: Dig Inn Leads the Next Generation of Fast Casual Restaurants

CFO Interview Exclusive: UPS Sees its Shipping Future in Healthcare, Retail and Green Tech

According to Yahoo! Finance, analysts expect Coach to earn 53 cents per share when it announces its fiscal fourth-quarter earnings in early August.  If that estimate is met, Coach's earnings per share will have fallen a staggering 40% year on year. 

Not only is the street's fourth-quarter earnings estimate at risk of being missed, but earnings guidance for the new fiscal year could be disappointing. Wall Street estimates have Coach earning $1.90 per share for its fiscal year 2015 period.

Coach's weak earnings potential is evident at the store level. From eye-popping discounts cheapening the brand in real time at leading department stores, to Coach shops in Macy's (M) being closed for remodeling, to misguided distribution in non-luxury department stores, the turnaround for Coach appears likely to not happen anytime soon. That is if it happens at all.

Take a look at these Coach items at 40% off at a higher end Macy's department store.  Spotted in the background is a Coach shop remodel.

Coach is also available in Sears (SHLD):

-- By Brian Sozzi CEO of Belus Capital Advisors, analyst to TheStreet. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff. Brian Sozzi is the CEO and Chief Equities Strategist of Belus Capital Advisors. He is responsible for developing and managing an equities portfolio of mid- and large-cap positions, in addition to leading the firm's digital content initiatives. He is also a personal finance columnist for Men's Health magazine.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,056.86 +3.15 0.02%
S&P 500 2,091.68 +2.91 0.14%
NASDAQ 4,808.8230 +1.9640 0.04%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs