Coach's share price has already fully valued the company's turnaround prospects, according to analysts who also factored in "steadily improving comp and margin trends over the coming four to six quarters."
They pointed out challenges Coach may face, including that turning a brand around in the minds of consumers is a tough undertaking, and that near-term sales improvements is unlikely to be linear.
Separately, the New York design house of modern luxury accessories and lifestyle collections announced earlier this month that it has completed the acquisition of Stuart Weitzman Holdings, a women's luxury footwear designer.
TheStreet Ratings team rates COACH INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate COACH INC (COH) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for COACH INC is currently very high, coming in at 76.71%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.48% trails the industry average.
- Net operating cash flow has significantly increased by 59.44% to $167.20 million when compared to the same quarter last year. Despite an increase in cash flow of 59.44%, COACH INC is still growing at a significantly lower rate than the industry average of 112.60%.
- COACH INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, COACH INC reported lower earnings of $2.78 versus $3.62 in the prior year. For the next year, the market is expecting a contraction of 31.3% in earnings ($1.91 versus $2.78).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 53.8% when compared to the same quarter one year ago, falling from $190.74 million to $88.10 million.
- You can view the full analysis from the report here: COH Ratings Report