Another high end fashion label will deliver their quarterly results this week, with Coach (COH) reporting its FQ4 ’15 numbers before the opening bell tomorrow morning. Investors in Coach are hoping management can deliver a result that can spur market bulls into action and reverse the downwards stock price trend.
Estimize predicts an EPS of $0.28, one cent below Wall Street consensus of $0.29. YoY earnings for Coach have been in continual decline over the past 24 months which has resulted in a share price collapse.
In terms of revenue, Estimize predicts a figure of $967.17M compared to Wall Street’s estimate of $972.68M.
Similar to it’s competitor Michael Kors (KORS), Coach has underperformed the market over the past 24 months with the stock returning a negative -43.9% relative to the broader S&P 500 index which as appreciated over 22%. There are a number of reasons why Coach has underperformed, however management are hoping that their initiatives over the past 12 months will begin to turn around the business and create shareholder value moving forward. One key strategy implemented by management is the remodeling of circa 70 Coach stores in North America. The remodeling of the stores is expected to increase foot traffic within its high margin stores and boost revenue growth.
Unfortunately for Coach, there are a number of headwinds that is negatively affecting the company’s bottom line. A rising U.S. Dollar is a major contributor to the stocks weakness and is hurting the retailer on a number of fronts. Firstly, a higher dollar is hurting the company’s international sales figures once the revenues are converted back into USD, and secondly, international travel entering the United States is also expected to be negatively influenced by the higher currency and therefore will result in less tourists entering into Coach’s North American stores.
The sentiment surrounding Coach is weak, and rightfully so. Coach is not expected to deliver returns to shareholders until management can turnaround the company’s sales and earnings growth. The two charts below sums up the struggles that Coach has experienced over the past 5 years. Investors who continue to hold this stock are hoping for a miraculous turnaround. Despite the company beating consensus consistently over the past 5 quarters, the stock still continues to fall. Therefore, it is likely that Coach will need an outstanding result tomorrow and some positive guidance from management if the stock has any chance of bouncing after the report.
(Photo Credit: Vivienne Gucwa)