Thursday, November 12, 2009

COH (or, Don't Shoot the Messenger Bag Holder)

shares of Coach Inc. (COH) hit another 52 week high yesterday. But $37 - give or take - has been a key level over the last several years. it seems reasonable to expect a tradeable correction soon, though one might view that big gap from a couple years ago as a more exuberant target.

with a forward P/E ratio in the 15s the company looks fairly valued if the prospects of a recovered economy are correct, and if the newly recovered consumer still hankers for the finer things in life. hey, if you stop paying your mortgage that nice handbag ain't so far out of reach anymore....

but it's like this: my sister got a J Crew catalog last week. she flipped through it for about 10 seconds and in mild disgust said, "what the heck is this? nobody's paying retail anymore!" so she tossed the catalog in the garbage.

now mind you, my sister and her husband are doing just fine financially, and can afford to buy pretty much whatever tickles the fancy, but that's just it; if folks like them who have the money won't pay the markups then who will?

nothing against Coach here, heck, they may fare better than some of the other names, I really don't know, but from what I can tell, the mindset, at least in the States, has moved away from the high end, high margin segment of the market. people will buy nice things if they see compelling value, but take a look at the sticker prices of stuff at the coach website. nice stuff, but not that nice.

Correction: Brooke says it was a Lands End catalog, not J Crew.