Update Coach (COH)

11/05/2010 2:13 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

Coach (COH) has successfully gone global. I think that’s the message in the September quarter results reported on October 26.

The company ended its June fiscal 2010 year with 20% of the U.S. handbag market and a 16% market share in Japan. Sales doubled to $100 million in China (where the company has a 4% share of the accessories market) and the company began to increase its penetration of the United Kingdom and continental European markets.

In the September quarter (the first quarter of the company’s 2011 fiscal year) the company reaped early returns from that strategy and continued to push its global strategy.

For the September quarter the company reported earnings of 63 cents a share, beating the Wall Street analyst consensus by 8 cents a share. Earnings per share grew by 43% from the first quarter of fiscal 2010. Revenue came in at $912 million, up almost 20% from the first quarter of fiscal 2010 and well ahead of analyst expectations for $847 million.

The company finished the quarter with 345 retail and 128 factory-outlet stores in North America, 169 stores in Japan, and 49 stores in China.

In fiscal 2011 the company plans to open 30 new stores in China, eight new stores in Japan, and 30 in the United States.

The company’s big new market, however, is an old one, Europe, where the company is launching new high impact stores and opening more in-store stores in high-end department stores. In fiscal 2011 Coach will open its “first regional global flagship” store on New Bond Street in London, and will launch new locations in France, Spain, and Portugal.

I think the stock can easily move up to a multiple of 20 times my estimated calendar 2011 earnings per share of $3.20 or $64 a share. As of November 5, 2010, I’m raising my Jubak’s Picks target price for Coach to $64 a share by September 2011 from the previous $51 by March 2011.

For more on why I think this holiday season will be good to retail stocks, see my post http://jubakpicks.com/2010/11/02/im-dreaming-of-a-green-christmas-for-these-five-retail-stocks/

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this post. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
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