Should you invest in Coach?
Even though the market is hard to predict, I strongly believe that right know it is not the right time to invest in Coach Inc. This year, the company is facing one of their biggest crises in their history. During 2014, the company announced that they will close 70 stores in North America reducing their store count by 13%. Furthermore, Coach’s revenue has decreased by 5.3% in 2014 thanks to the decrease in revenue in the North American stores which was propelled by the poor sales of Coach’s women accessories and handbags. Furthermore, Coach’s net income had also suffered a drastic decrease - going from 1,034,420 in 2013 to 781,336 in 2014 – thanks to a significant decrease in operating income of $404.4 million. The reduction in net income has greatly influenced their decrease in profitability ratios such as return on assets, return on equity and earnings per share. Coach, one of the leading design houses of modern luxury, is going through a rough time and it is starting to tremble, and its decrease in profitability is clearly reflecting this.
On the other hand, in the years 2012 and 2013 Coach Inc. had a high gross margin ratio. However, it suffered a significant decrease of 4.3% in 2014 (it went from 72.9 in 2013 to 68.6 in 2014). The change in Gross profit was caused by an important decrease in net sales – they went from 5,075,390 in 2013 to 4,806,226 in 2014 – and in Gross profit – it went from 3,698,148 in 2013 to 3,296,963 in 2014. The Gross Margin ratio does will rarely to go up in the upcoming years as Coach has lost a significant part market share to its main competitors - Michael Kors and Kate Spade & Co – and will hardly increase their sales anytime soon. Coach’s new Create Executive Director, Stuart Vevers, said that the company is making efforts – such as introducing new products also for men - to recapture and gain clients; however, he stated “It sounds like they’re seeing pretty good trends on the new...