Coach Bagged by Hockey Moms?
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Coachdelivered lower-than-expected revenueon Tuesday, mainly because of weak sales in the U.S.
While this caused many investors to dump the stock , one analyst sees a way the handbag maker can regain its high-end profits.
“Coach blamed the entire miss on inopportune timing of taking away coupons from factory outlet stores,” said Laura Champine, retail analyst for Canaccord Genuity Securities.
The company has since reinstated these coupons, citing pressure from increased discounting in the retail sector overall. Good move, Champine said, calling factory outlet sales a “key driver” of the business.
“Factory stores are actually much more profitable than full-price stores, because SG&A (sales, general and administrative) expenses are so low,” Champine told CNBC’s “Squawk on the Street.”
So, the luxury retailer’s best bet right now is to sell at a discount to hockey moms at factory outlets?According to Champine, yes.
“Those hockey moms are more important than China is. China is just turning profitable now, so it is not really a material contributor,” said Champine. “Coach has such huge share — 25 percent in dollars — of the U.S. market. They are very much dependent on their mainstream American customers.”
Champine has some confidence in this customer base. She has a $71 price target for Coach, but currently rates the stock a “hold.”
Meanwhile, the U.S. is showing some signs of a summer uptick. Personal income rose in June, and in July, a rise in consumer confidence came unexpectedly.
—By CNBC.com’s Jennifer Leigh Parker
Additional News: US a Drag on Coach’s Fourth-Quarter RevenueAdditional Views: Analyst Sees Growth Potential in Coach
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Disclosures:
Laura Champine does not personally own Coach shares, nor does her firm, Canaccord Genuity.
Disclaimer
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Follow Jennifer Leigh Parker on Twitter @jparker741.
