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Strategies & Market Trends : Value Investing
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From: Spekulatius1/5/2012 2:14:44 AM
  Read Replies (6) of 78733
 
retail short Coach - COH

What do you guys think about shorting COH at 61$+. Reasoning:
1) Valuation ->20X earnings
2) shrinking operating margins (38% (2006)---> 31.4% (2011), gross margins has similar trends
3) Expansion in Outlets undermines brand equity
4) China luxury business getting tougher (COH is expanding quickly there)
5) COH is not a top tier luxury brand like LVMH or the Swiss Watchmakers imo
6) COH lower end customers vulnerable to economic pressures

I'd like to hear arguments pro and against this short. I like to establish a consumer centric short based on my assumption that the reduction in savings rates that has fueled consumption despite stagnating income cannot continue. I believe COH valuation is overextended in light of the challenges.
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