Today, the most unlikely retail company came out and showed hope for a high-end Christmas season. I suggested taking a look at this underdog over the weekend (click here). Coach condoned my previous mentioned sentiments today, suggesting that this retail can be the Polar Express powering through the snow and giving great returns this holiday season.
I think one of the strongest testaments to the fact that Coach remains undervalued and an underdog is that the company will be repurchasing $1.5 billion worth of shares. The earnings announcement reaffirmed many of the ideas I mentioned on Sunday. illustrating a company with decent growth, a strong brand name, and is successfully wading through economic uncertainties. As we all know well, China and Europe pose huge problems (of uncertainty), particularly when it comes to the category of luxury brands. Luckily for Coach, China remains a huge growth area for the company, contrary to popular belief. I won’t argue with a company that outperforms where others suffer.
Coach has many benefits, particularly in this environment as we are coming into the colder seasons (hopefully it will be frigid this season, boosting sales),being that accessories are huge in the current market. We saw the accessories as a piece of fashion just begin to make inroads during the last holiday season. Any male who shopped for an extensive group of females knows that the Michael Kors wristwatch was on every girls dream list (for a watch under $500). Coach has just begun to make headwinds in the accessory arena. In this upcoming winter season I see them going head to head with Michael Kors, and hopefully taking a piece of the accessory pie. People just love accessorizing and obviously the masses love accessorizing with Coach as it showed a 10% growth in accessories last quarter in North America.
As we have seen the stock market overall perform well during the first part of 2012, one can undoubtedly argue that the wealth effect will have some play into the holiday season. As we see even the middle classes retirements make some leaps and bounds, this could be a Christmas retail many of use can only dream about (particularly for an aspirational brand like Coach). We have seen many of the luxury brands do well in unsavory conditions, no one’s to say they wont excel in more comfortable economic conditions.
With Coach setting itself apart due to its historic branding and price points, they are undoubtedly the play of aspirational luxury.
Ask those women in your (middle to lower upper class) life about Coach, and they will respond “I need that.”
Photo by Martika G