Please ensure Javascript is enabled for purposes of website accessibility

Why Coach Inc. Stock Has Gained 36.2% So Far in 2017

By Steve Symington - Jul 8, 2017 at 8:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Two solid quarterly reports and an impending acquisition have left shares of the fashion accessories leader sitting pretty.

What happened

Shares of Coach Inc. (TPR -3.57%) have climbed 36.2% so far in 2017, according to data provided by S&P Global Market Intelligence, thanks to a combination of the company's latest strong quarterly report and its subsequent move to acquire competitor Kate Spade & Company (KATE).

So what

To be fair, Coach stock had already enjoyed a decent start to the year, gradually drifting around 12% higher through the end of April with the help of a reasonably solid holiday-quarter report in late January. But then shares jumped more than 17% in the month of May, including an 11.4% single-day pop on May 2, 2017, after Coach's fiscal third-quarter results (for the period ended April 1) demonstrated encouraging progress in the company's ongoing turnaround. 

Coach store front


More specifically, Coach's revenue last quarter declined 4% year over year to $995 million. But that was also in line with expectations as Coach strategically closed certain stores and reduced promotional events in an effort to bolster its brand positioning. To be sure, Coach saw a 3% increase in comparable-store sales for its North American business, even despite an unfavorable shift in the timing of Easter this year.

If that weren't enough, the following week Coach continued to rise after it announced an agreement to acquire Kate Spade & Company for $18.50 per share in cash, a deal that values its competitor at $2.4 billion. Coach CFO Kevin Wills noted the "complementary nature" of the two businesses will allow them to realize roughly $50 million in annualized synergies within three years of the deal's closing, through a combination of greater scale, inventory management, and operational efficiencies.

Now what

At the time of the original acquisition announcement, Coach predicted the transaction would close some time in the third quarter of this calendar year.

It's worth noting, though, that Coach has since extended the expiration of its tender offer to purchase all outstanding shares of Kate Spade stock by roughly two and a half weeks, to July 10, 2017. This shouldn't be cause for alarm, however, as Coach insists the original terms and conditions for the acquisition remain unchanged. Rather, Coach extended the deadline for this step to satisfy the waiting period under the Japanese Act on Prohibition of Private Monopolization and Maintenance of Fair Trade. That waiting period is expected to expire on July 2, 2017.

In any case, once Coach completes the acquisition, it might well add fuel to the fire of its turnaround, especially if the company delivers another strong quarterly report when it next announces results in early August. For now, investors should be more than happy with where Coach stands. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Kate Spade & Company Stock Quote
Kate Spade & Company
Tapestry, Inc. Stock Quote
Tapestry, Inc.
$31.85 (-3.57%) $-1.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.