There's no sense in sugarcoating it: Coach Inc.'s (TPR 1.50%) crucial North American segment is in terrible shape right now. And if recent comments from Coach CEO Victor Luis at the company's analyst and investor day are any indication, their stateside operations aren't expected to improve anytime soon.
Specifically, Coach stock plunged after the company announced it will close around 70 of its underperforming stores. In addition, Coach projected a low-double-digit drop in revenue for the fiscal year ending June 2015, thanks in part to an expected high-teen percentage drop in same-store sales.
"It's not about September."
Many investors are rightly anticipating the September launch of the debut collection from Coach's new creative director, Stuart Vevers. However, Luis further tempered expectations for a quick turnaround by stating:
It's not about September. It's not about the next "It" bag that we're launching, or the next "It" collection. It's about, at the end of the day, how we evolve the brand over this journey that we are on.
And you know what? While the market hates being essentially told to hurry up and wait, I found Luis' words refreshing. After all, what could be more Foolish -- with a capital "f," of course -- than consistently maintaining a long-term outlook for building a sustainable business?
Luis' long-term stance also isn't anything new. Just before his appointment as Coach's CEO, for example, here's what Luis stated in the company's quarterly earnings report (emphasis mine):
Coach is an iconic brand, grounded in authenticity and heritage, with a proven history of successful reinvention. We are confident we're taking the appropriate strategic actions, knowing that this is a multi-year journey that ensures both brand vibrancy and healthy, long-term growth.
In the end, while the store closures and revenue declines are certainly unsettling, this news shouldn't be the least bit surprising to patient, long-term investors.
Plenty of work ahead
But as one of those investors myself, I'll be the first to admit Coach has its work cut out for it.
To be sure, I only opened my first position last November, but I have watched Coach stock steadily drop more than 40% over the past year alone as each passing quarter outlined evidence of its North American weakness. Last quarter, for example, Coach's North American revenue plunged 18% year over year to $648 million. Even then, it still represented nearly 60% of Coach's total sales.
Meanwhile, up-and-coming competitors like Michael Kors and Kate Spade continue to grow at a staggering pace, steadily grabbing market share by building dozens of new retail locations in the region. And they won't be slowing down, either, with the companies recently voicing intentions of opening 45 and 35 new North American stores, respectively, this fiscal year.
However, unlike Coach, Michael Kors and Kate Spade aren't trading at a meager 12.6 times next year's estimated earnings. And neither company pays a 3.4% dividend as Coach does. Now, that doesn't mean Coach stock can't fall further from here. But if it does -- and remembering I bought my shares with the intention of holding for at least five years -- I'll rejoice knowing my dividends are being reinvested at a lower price while I wait for that turnaround to come to fruition.
