Why Coach Is a Screaming Buy Today

Coach (NYSE: COH  ) is one of the best operators in the luxury-goods space. It's also one of the cheapest you can buy today. 

Even in an environment of weak consumer spending the past few years, Coach was able to deftly manage its wide gross margins, indicating the durability of its brand. Now, with Coach putting China in its sights, the company could unlock enormous growth going forward. 

China already accounts for 25% of the world's luxury-goods purchases, and with a rapidly rising middle class, that's just the tip of the iceberg.

See more in the following video.

As good as Coach is, though, there is no denying that Michael Kors is red hot right now, but every investor is wondering whether the stock has finally become too expensive, or whether is still has room left to run. The Motley Fool's top analyst on Michael Kors gives investors all the information they need to make the right decision. We cover the key must-watch areas, opportunities, and threats to the company that investors need to know. To claim your copy, simply click here now for instant access.


Read/Post Comments (2) | Recommend This Article (3)

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  • Report this Comment On December 05, 2012, at 2:39 AM, steljan wrote:

    I am alway very suspicious when a buy recommendation is made because the company has presence in China. Coach has been in China for quite some time now and has been able to capitalize on that but China is also one of the most competitive places in the world, you have 100s of luxurious brands that compete for the Chinese consumer therefor to say that Coach is a buy because it has China presence than you should recommend 100 other brands as a buy because of that same reason. The real picture is quite different, the Chinese consumer has matured throughout the years and views brands like Coach as mediocre brands and this is something your article is missing. Tiffany just gave you a preview of whats to come for Coach, the brand Coach will become an outlet brand it has lost its glitter long ago and this is the reason why the stock is cheap not because investor have neglected and overlooked Coach. The consumer has gotten bored of Coach the Chinese very much so. This article is a reflection of how much you really know of China.

  • Report this Comment On December 05, 2012, at 8:41 AM, TMFBWItime wrote:

    @steljan

    Thank you for your comments, but I respectfully disagree. My research has suggested that the Chinese luxury buyer is gravitating towards more subtle and sophisticated luxury buys, ie. moving away from Louis Vuitton and towards brands like Coach. Not only that, but the appetite for luxury goods in China is not slowing down, the country now makes up more than 25% of the world's luxury goods purchases, and that's while the average annual salary is still around $4,000.

    Coach's own recently performance would support this. In the most recent filing coach wrote: "China continued to achieve double digit comparable store sales."

    There are also a few important misconceptions about China and luxury good consumption. Though the country produces the lion's share of the counterfeit products, every survey I've seen indicates that Chinese consumers, particularly upper and middle class women, would be embarrassed to own counterfeit products. They like the real thing. Also, while the slowdown in China is real, the country is still growing, has a rising middle class, and is still experiencing large scale urbanization. These three trends all support more consumption driven companies like Coach and McDonald's in the long run.

    I've traveled to China in the past and have witnessed a rapidly rising population that's eager to enjoy they're growing wealth. Though I surely only observed a microcosm of the population, it confirmed a larger trend towards luxury consumption in the nation.

    Thanks for your insight, Fool on!

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