I don’t usually like to invest in retailers but Ross Stores (ROST) and AEROPOSTAL (ARO) made me money in the past. The season is back for these companies but one has to be extraordinarily careful this time. ROST and ARO had their runs and escaped the value sphere for now. In the retail sector Coach stands out for me and here is why:
Expansion in China!
The story of Coach now looks like YUM Brands 2 years ago when they started expanding their restaurants in mainland China. Look up YUM stock since then and you will know what I am talking about, up around 57% in 2 years.
Brand Value is not fully realized globally!
Few have not heard of Coach brand in the west, but there is still much room for this recognition to expand in many emerging markets. This brand asset is yet to materialize fully in the stock.
Creating higher highs and higher lows. Here is a 2 years chart:
Trailing Twelve Months of revenue chart tells the story.
Rising Return on Invested Capital
Coach management seems to know where and how to invest their capital.
Buying back stocks and reducing their float is certainly a big positive for remaining share holders. Coach was apparently reducing its Outstanding Common Shares numbers.
The debt to equity ratio rose sharply the beginning of 2011, but the borrowed money was well used and Debt/Equity ratio is coming down
Love to hear comments on Coach!