Shares of the handbag-maker fell more than 8% Thursday after management reduced guidance at its investor day. Management guided to a low double-digit sales decline. It predicted a high-teens same-store sales decline in North America. Management also braced investors for margins to be in the high teens rather than above 20%.
The news renewed calls, which began earlier this year, for new leadership from outside of the company.
$COH Calling out of the weather and Easter huh for the earnings miss. Pathetic excuses. Luis needs to be fired. Has failed to turnaround biz? Jack (@OptionHawk) May. 6 at 12:33 PM
Luxury brands are known for high margins. So the projected margin decline was widely viewed as evidence that Coach's brand appeal has faded. It's also losing share to luxury accessory and bag makers such as Michael Kors (KORS) and Kate Spade (KATE). Kors, for comparison, guided to a 20% same-store sales increase when it reported earnings on May 28.
@ihasni Bearish. This is a fashion brand. Once the brand is eroding, there no look back. Women prefer Kors over COH? Mike (@scottsdalem) Jun. 19 at 02:04 PM
$COH brand has become antiquated garbage? Mike Dee (@TheSleepyJewel) Jun. 19 at 01:49 PM
Investors said the brand would have difficulty bouncing back from recent declines without a catalyst such as a management change. The stock is down nearly 30% year to date.
$COH has a history of bouncing after being crushed. but on those occasions it wasn't completely broken technically & at multi-year lows? Steven Spencer (@sspencer_smb) Jun. 19 at 02:14 PM
Coach's CEO, Victor Luis, hasn't served very long in the role. He was appointed in January. However, he has been at the company for more than a year. He held the role of Chief Commercial Officer of Coach with oversight for all of the company's revenue-generating units, strategy and merchandising from February 2013.
So what will happen with the stock?
Some investors predicted that Coach was near a bottom. They expected that management would turn the brand around soon enough. As a result, they said the stock could be attractive to value investors. The stock trades at just under 13 times its expected 2015 earnings. Kors trades at 18.8 times forward 2015 earnings.
$COH on my watchlist hasnt bottomed yet.. thinking it goes down low 30s... tough for fashion to make a come back. But I think coachnwill? Steve (@Stocknut62) Jun. 12 at 11:35 AM
But many investors lacked confidence in leadership.
... but unfortunately $COH is going to have an amazingly difficult time transforming its brand image? tickertutor (@tickertutor) Jun. 19 at 11:51 AM
At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.