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Why Coach Shares Plummeted

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of luxury handbag maker Coach (NYSE: COH  ) plunged 17% on Tuesday after its quarterly sales came in below Wall Street expectations.

So what: Strong sales overseas helped boost Coach's first-quarter profit 24%, but sluggish U.S. demand is triggering serious concerns over high-end spending. While sales in Japan and China spiked 16% and 60%, respectively, management had to lure cost-conscious North Americans away from cheaper rivals with increased promotional activity, raising worries about profitability going forward.

Now what: I'd look into today's big plunge as a possible buy-in opportunity. "Our goals remain unchanged," Chairman and CEO Lew Frankfort reassured investors. "We're committed to achieving double-digit top- and bottom-line growth over our planning horizon. We have a business model that generates significant cash flow and we're in a position to invest in our brand while continuing to return capital to shareholders." When you couple Coach's still-solid fundamentals with its cheapish forward P/E of 12, buying into that long-term bullishness might not be a bad idea.  

Interested in more info on Coach? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Coach. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (2) | Recommend This Article (7)

Comments from our Foolish Readers

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  • Report this Comment On July 31, 2012, at 3:01 PM, JohnCLeven wrote:

    Agreed. Great buying oppurtunity. wonderful company at a fair price.

    Long BRK.B, UPS, and COH.

  • Report this Comment On July 31, 2012, at 9:40 PM, cimarron430 wrote:

    YUP! I agree as well. The market seems very skidish these days and runs for the doors with each bit of bad news. I will buy more.

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10/21/2016 4:04 PM
COH $35.55 Down -0.36 -1.00%
Coach CAPS Rating: ****