In less than 12 months the stock has doubled from just over $25 to well over $50. That doesn't even touch the returns seen in 2002 through 2005 so the name shouldn't be new to anyone who traffics in growth stocks. The company has done a superb job of increasing its brand awareness both domestically and now abroad as it cements its strong foothold in Japan and looks toward China and the Middle East for further growth. The company now has something for everyone, as even measly middle class shoppers can get a handbag at one of the factory stores for less than $400. The company still makes an absurd margin on these cheaper bags and customers think they got a discount!
But has the company gone too far, too fast? With all these stores opening, one begins to wonder if its such a special thing to own a Coach handbag anymore. As middle class moms pass heiresses holding the same or similar purses on the sidewalk, I begin to think that the mystique could be wearing off. Celebrities may have to find a new way to spend their money that draws attention to their deep pockets and purses than buying.... purses.
So no, I don't think COH is going out of business anytime soon. I actually expect their sales to increase this quarter and for EPS to meet and maybe even exceed street expectations. But I would keep a close eye on margins to see if the company is still able to sell $1,200 bags that are available down the street for much less. I would look at their metric as to what percent of sales are from the category of $400 or more items and watch to see if the average revenue per transaction softens. The company may laud the fact that sales in the factory stores is up over 30% again but the skeptic in me would be wary that this is just another name for outlet sales that could not be sold at full retail price in the main stores.
I do have a short position in COH and it is on a short leash. I realized that I could be very early to this game and I don't want to hold it if we resume the pattern of hitting new highs, but at this point I believe the risks far outweigh the potential gains for owning this stock. If you own the stock, why not sell it and go use the cash to buy a nice leather bag?
FD: Author has short position in COH
3 comments:
i wonder if Croxs would have more investable growth then similiar space Coach and Underarmor? While iam not sure yet, my feedback is convincing. production is 4 million pairs of new generation coggs sold per month, market share shark.. price points > 50% less then sneakers, stable fan base bostered by heavywieght endorsments by working professionals suchs as RN nurses, new rubber technology that makes the shoes most comfortable out there... per working professionals, International Sales growth striking, and clones that have limited traction, and limited quality despite lower prices.
thoughts? Boris
Well all three companies have very different products for a very different target market. but I think you are right that the potential for CROX is enormous. I made a decent profit owning the stock but sold calls against my position and had the stock called away just before the most recent run. I am too concerned about a pullback right now to put capital to risk there.
CROX has a lot of emotion surrounding the stock. It is a favorite of short sellers which has a tendency to push it higher. But at the same time investors are buying at any price which will end at some point. For an example of the emotion see David Horowitz article and related comments. You can also see the article at seeking alpha and some additional comments there.
Be careful with this name but it could still be a big winner.
I know this spot is suppose to be for Coach, sorry. Will you fix a post for Crocs?
Crocs.
So, the dip was $7 to $40-ish. How much more of a dip would get you enthusiatic to get back in?
Since last post, i found out that in Iceland and Israel, where consumers must take shoe buying seriously, due to ice/snow and war threats, pentration is amazing 20%. Current estimates for Crox is 46 million units this year and 58 million units next year. on $17 per pair wholesale price. Also, its not about fashion but about the material. they have invented a new material croslite. Much like Zoltek invented and developed light weight carbon fibers, that enventualy found a key usage in 200+ foot windmill blades. Also this shoe price point is undercuting NIKE-REEBOK much much deeper then Netflix did to Blockbuster, while still having huge 60% gross profits. Also, 3 years ago, when the croslite material was owned in Canada, the shoes were retailing for $13 canadian.
I assume there is potential to about $65, but the price is well about the most recent base breakout of $25/$28-ish so i am late with my first buy around $38 in late May/June.
They reason iam still interest is because the top line grew at 200%, and international grew at 441%, so a 30%-40% breakout past $28 might be just beginning.
Boris B.
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