Coach to Unveil Next-Gen Retail Concept - Analyst Blog

Luxury retailer Coach, Inc. COH intends to develop next generation retail outlets in collaboration with Studio Sofield, an eminent New York designing studio.

The first store under this association will be inaugurated in the fall of 2014. The 3,909 square feet store will be located at Beverly Hills, CA. The second store will come up at Time Warner Center in New York City and will cover an area of 5,335 square feet. The company also plans to open an 8,697 square feet store in Shinjuku district of Tokyo, Japan.

Further, Coach will introduce the concept of next generation retail outlets in its remaining locations in the coming days. According to the company, the move is an effort to enhance its brand value.   

Coach has been battling weak sales for quite sometime now. The company posted lower-than-expected second-quarter fiscal 2014 results. Consequently, the estimate for Coach has been on a downtrend over the last 90 days. Estimates for fiscal 2014 and 2015 have plunged 9.2% and 10.0% to $3.15 and $3.43, respectively.

Sluggish North American women's bag and accessories business has offset sturdy growth witnessed in Men's business, footwear and strong results across Asian and European markets.

Moreover, rising competition, especially from Michael Kors KORS has hit Coach hard. Moreover, with macroeconomic backdrop, having not yet fully recovered, offers very little impetus to boost discretionary spending, thereby keeping sales and margin under pressure.

Coach is slated to report its third quarter fiscal 2014 results on Apr 29, 2014.  Our proven model does not conclusively show that Coach is likely to beat the Zacks Consensus Estimate this quarter. This is because Coach carries a Zacks Rank #3 (Hold) and a negative Earnings ESP of 3.18%.

For a stock to outperform, it needs both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3. Two stocks having the right mix, include Southern First Bancshares, Inc. SFST with Earnings ESP of +7.41% and a Zacks Rank #1 (Strong Buy), and Interactive Brokers Group, Inc. IBKR with Earnings ESP of +13.79% and a Zacks Rank #2 (Buy).