[VIDEO] Are You Missing Out on Coach (COH)?


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by Dan Myers

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The fashion industry is a very fickle business.  What is popular one day can be hated the next.

This runs counter to the Value Investing approach where we want companies that we see being around in 10 or 20 years without much change.

Can we find value in the fashion industry?

The Fashion Industry

In fashion, brand is everything.  What people wear and have on their person tells a story about them.  Each item is saying something about you.

The logo on the item tells an even bigger story.

We have a very different impression of someone wearing a Nike shirt than we do of someone wearing a cut off t-shirt on the golf course.  This is the basis of the fashion industry.

The brand is responsible for marketing you.

Introducing Coach (COH)

Coach is long standing brand in fashion.  Since 1941, they have provided handbags of remarkable quality and status.  They have branched into other fashion arenas such as footwear, watches and men’s fashion.  They have built a very strong identity and it is one that people want to share.

Being a strong brand is vital in any industry and life or death in fashion.

In this session, we will dive into Coach and see whether or not they have what it takes to be called a value investment.

What’s Explained in the Video

  • Coach’s business model
  • How increased pricing can be a benefit in fashion
  • Why ROA and ROE are higher in Coach than other businesses
  • The benefits of assets moving through the business vs. fixed assets
  • Signs of shareholder friendliness
  • Is a vendor commitment really a debt
  • Everyone has a China growth story – Why Coach’s may be for real
  • DCF Valuation of Coach

Watch the 3 Part Video on Coach

Part 1 | Part 2 | Part 3

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3 responses to “[VIDEO] Are You Missing Out on Coach (COH)?”

  1. Louis says:

    Hey Dan…..

    I liked your videos….

    I think you might have skipped some of the problems with this company. A large chunk of the company’s growth is coming from China. If the country’s inflated real estate market implodes, the company can kiss a significant portion of their anticipated growth good bye.

    You also mentioned the company had room to grow in the North American market. The retail store growth is limited. During 2010-2012 period, they only opened 13 stores. However, they did open 71 factory stores during the same period. They also have a very hot competitor to contend with – Michael Kors.

    The company also seems concerned with future earnings growth and as a result they are now in the process of promoting a complete “lifestyle brand”. Although handbags will still be an important part of their earnings, they realize they need to capture as many dollars as possible to contribute to growth. This new initiative has many unknowns and is probably driving Wall Street to tread carefully with buying the stock.

    I really don’t see Europe contributing much to Coach. The continent has major fiscal problems.

    It seems like their best days are behind them. Large margins always attract new competitors.

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