3 Reasons to Buy Coach Stock Now

On April 23, Coach  (NYSE: COH  ) stock rose more than 11% in a single day after the company posted solid quarterly results. To be sure, not only were Coach's numbers great in their own right, but they also helped alleviate investors' concerns of prolonged weakness following Coach's first earnings miss in nearly three years this past January.

Even so, Coach stock has largely traded sideways since then, and currently sits within pennies of its April 24 closing price at just below $56 per share.

But that doesn't mean Coach is a dud from an investment standpoint. To the contrary, here are three reasons I think investors should be clamoring to buy Coach stock today:

Filling investors' bags... with money
In April, Coach raised its quarterly dividend for the fourth time in as many years since the payout was initiated at $0.075 per share in 2009. Now, Coach stock's quarterly dividend sits at more than three times that amount, at $0.3375 per share.

In addition, last October, Coach's board approved an enormous $1.5 billion share repurchase plan, affording the company the chance to significantly reduce its number of shares outstanding through Coach stock buybacks through June 30, 2015.

On that note, remember the new plan was incremental to Coach's previous $1.5 billion repurchase plan, which was announced in January of 2011. That authorization, however, was entirely exhausted in time for its own June, 2013 expiration.

As it stands, while Coach didn't repurchase any shares last quarter, the company has around $1.4 billion remaining from the new authorization.

One nation, 1.35 billion people
While Coach achieved modest 7% overall growth last year, including a 6% rise in international sales, the growing Chinese middle class led the way by propelling Coach's China segment revenue 40% higher from the same year-ago period. Sure enough, that growth was driven by both improved distribution, and double-digit comparable-store sales increases. In addition, on a constant currency basis, it's important to note that international sales actually rose 14%, now making up more than a third of Coach's overall revenue.

Additionally, Coach has been busy acquiring its Asian distributors over the past two years, and now directly operates 93 locations across Asia, including 49 in Korea, 27 in Taiwan, 10 in Malaysia, and seven in Singapore.

Next floor: Menswear
Finally, Coach stock boasts another catalyst thanks to the company's recent foray into men's accessories, which are on track to grow by about 50% globally in 2013, and should account for more than $600 million in sales by the end of the fiscal year.

coach stock, coach men's accessories

Coach men's products, Image source: Coach

Altogether, according to management during last quarter's conference call, Coach's Men's segment was a significant contributor to "driving productivity in existing stores," while at the same time presenting Coach with a substantial new distribution opportunity. In fact, the company even went so far last quarter as to open two new factory men's stores in North America, as male consumers increasingly embrace the brand.

That trend is even more pronounced overseas; in China, for instance, given the size of the Men's opportunity, Coach plans to open at least seven new dual-gender stores during the current quarter alone. In Japan, management says most of the 11 net new locations they plan to add in fiscal 2013 will be dedicated to men's products.

Of course, as fellow Fool Tamara Rutter pointed out recently, the fact that Coach is marching along nicely doesn't mean they should ignore the threat of other growing luxury apparel companies, like Michael Kors (NYSE: KORS  ) . Last month, Michael Kors announced an impressive fourth quarter, during which retail revenue increased 58.8% on incredible 36.7% same-store sales growth. That's why Coach is increasingly striving to market itself as a stickier "lifestyle" brand to consumers, to differentiate themselves from the fast-growing competition.

Foolish takeaway
Then again, that doesn't mean both companies can't peacefully coexist in the world of luxury retail.

Unlike Coach, Michael Kors doesn't offer a dividend. In addition, all that growth has Michael Kors stock trading at a premium of more than 30 times last year's earnings, and 18 times next year's estimates.

Compare that to shares of Coach, which trade around 15 times last year's earnings and 13.6 times next year's estimates, and its price looks more than fair. In the end, when I add that to Coach's shareholder-friendly policies, international growth, and opportunities in men's accessories, I'm convinced that patient investors who buy Coach stock at today's prices will be more than happy with the long-term results.

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