We added Coach (COH) to our Real-Time Alerts this week on the short side. The intermediate-term outlook remains bearish for us and for several reasons. Revenue is decelerating and the cost of growth is rising at Coach. Growth is dependent on the new ‘Legacy’ launch, its new men’s line and China. With the sell-side becoming increasingly bearish on the stock over the last five months, it’s hard to find positives in a room full of negatives with COH.
Our 9-point duration screen posted below shows what we think of Coach from a revenue, margin and cash flow perspective over our three durations: TRADE, TREND and TAIL. While COH looks cheap relative to history at current levels – the reality is that valuation is not a catalyst.
