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