There are times when The Business Press Maven must explain in great detail how the business media's collective perceptions do not match reality and why that leaves investing opportunity for you in the spread.
Then there are other times, like today after
third-quarter earnings, when I must don a hazmat suit to review business media reports that are so all over the place, you wonder if they are truly talking about the same company.
Why do I wear protective gear today? To reinforce the lesson that if you rely on one single article to inform you about a company's earnings, you are setting your portfolio up for a violent rupture.
They Just Don't Get Coach!
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Let's start by taking a look at the headlines:
"Luxury handbag sales lift Coach," said
MarketWatch First Take: Coach's cloudy forecast
, later running a more detailed:
Coach shares fall as retailer opts not to give sales breakdown
Get ready for a lurch back to the land of the positive.
Dow Jones intoned approvingly.
, the future was clear, but troubled: "Coach Profit Is Up But Margins Are Tightening."
At least, it appeared troubled in that headline, which sat atop the article. The Wall Street Journal headline that ran on Yahoo! finance carried a different meaning:
Maybe, I began to think, there was a double bit of news at play here. Earnings beat expectations, but the company was less forthcoming, making investors nervous. So I read further in
The Financial Times
, which seemed to tell me only that expectations were surpassed but somehow, some way investors reacted to the numbers themselves like a blister agent:
"Meredith (NYSE:MDP), the media and marketing company, slashed its full-year forecasts while Coach (NYSE:COH), the luxury leather goods brand, beat analysts' expectations but investors reacted poorly to both results and the pair led the sector down."
So it was the results, which the
already said lifted Coach, that sent it down?
And while others were placing the words "cloudy forecast" in their headlines,
weighed in with just the opposite. Forecasts were clear and good:"Coach expects to beat in 4Q, reiterates 2008 guidance: Coach says 4th quarter profit likely to beat Wall Street estimates, affirms 2008 view"
So what happened here? What should you think? What should you do? What, besides the need to read more than one article on any earnings report, does this teach the savvy investor about how to approach what we read about stocks? And when is The Business Press Maven going to stop asking questions and start answering them?
The basic issue at play here is complexity, and that's never a good one for the business media. While Coach surpassed its numbers, you might think the down day had a corrosive effect on perceptions. Though this happens on occasion, the Dow was actually down less than 1%, so it's the case here that a receding tide swamped all ships. The real issue -- and the one more important than the technical hit of expectations -- is that the numbers were hit on the strength of the sort of discounting that gives you margin and brand issues.
Worse: Margins will be facing this entry into a collapse zone with
communication to investors. This rarely bodes well and should always step on a headlined celebration. For all of you savvy investors whose heads are spinning from all the different takes on Coach, I'll leave you with the first three sentences of The Wall Street Journal article, which displays with proper prominence all the issues at stake:
"Luxury handbag retailer Coach Inc. said fiscal-third-quarter net income rose 8% on a strong 19% increase in sales. But in an ominous sign, Coach said profit margins shrank partly because it sold more discounted handbags. Coach Chief Executive Lew Frankfort also angered investors Tuesday by saying the company was stopping its longtime practice of reporting sales at stores in outlet malls, where handbags are discounted, separately from those at full-priced stores. Coach also declined to give guidance about its performance in fiscal 2009, which begins this summer."
Know What You Own
: Coach operates in the consumer goods and retail industry, and some of the other stocks in its field include
. These stocks recently traded at $42.09, +2.38%, $34.57, -0.29% and $23.36, +0.13%, respectively. For more on the value of knowing what you own, visit TheStreet.com's
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.
Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven? column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;
to send him an email.