Luxury Retailer Coach Raises Dividend, Beats Estimates to No Avail (COH, KORS, TUMI)

Companies and Brands

Published: April 24, 2012 11:00 am

The high-end of the retail market has faced a few bumps in the first calendar quarter of 2012, with gasoline prices on a steady march higher while home prices continue to sink. Today’s earnings report from Coach Inc. (NYSE: COH), while better than expected on EPS and revenues, did not meet expected same-store sales targets for the company’s third fiscal quarter.

Two recently publicly traded companies could be making life a bit more difficult for Coach. Michael Kors Holdings Ltd. (NYSE: KORS) and Tumi Holdings Inc. (NYSE: TUMI) have now entered a sector dominated by LVMH Moet Hennessy Louis Vuitton (OTC: LVMUY.PK) and Coach.

Coach reported revenue of $1.11 billion for its third quarter, virtually on target with the consensus estimate of $1.10 billion. EPS came in at $0.77, better than the expected EPS of $0.75. What is hampering the shares today is a miss on same-store sales, which showed an increase of 6.7% for the quarter. Stifel Nicolaus’s analyst had an estimate of 7%.

And adding to the weight on the shares today is the simple fact that Coach didn’t have a blow-out quarter. Just meeting estimates — beating them by a little — isn’t enough to keep up investors’ spirits. Even a 33% jump in the dividend didn’t help. Coach will pay an annual dividend of $1.20/share beginning in July.

Over the past 12 months, Coach shares have gained nearly 39%. Year-to-date the company is up more than 18%, but Kors, which came public in December, is up nearly 59% in 2012. Tumi, which only came public last week, is down about -3.8% from a high of $28.70, more than 44% above the offering price of $18/share (Tumi’s underwriters did the company no favors).

The focus on men’s clothing and accessories will get sharper this year as the high-end retailers look for growth. In its last quarterly report, Coach noted that its men’s fashion revenue was on track to double, year-over-year, to $400 million in 2012. LVMH and Kors are also putting out more products aimed a male buyers, and Tumi probably won’t be far behind.

Coach shares are down about -3.4% at $72.60 in a 52-week range of $45.70-$79.70.

Paul Ausick

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