Chris Swasbrook presented his in-depth investment thesis on Coach (NYSE: COH) at Best Ideas 2016.
Coach is famous for its Coach logo bags and accessories. The Coach brand is the #2 accessories brand worldwide. The company has 965 directly operated stores, a presence in ~45 countries and 325 million customer visits per year. The past expansion strategy under previous management led to excessive promotions that damaged the Coach brand and allowed competitors to secure meaningful market shares. Since 2013, the company has embarked on a turnaround/rebranding effort, led by a new creative director Stuart Vevers. Investors are clearly becoming impatient as the company continues to rein in promotions, close stores, and execute a rebranding strategy that has seen a significant decline in revenue and profit in the short term. This potentially provides a longer-term investment opportunity, as the stock trades at multiples below that of its major peers and below past industry consolidation multiples. This despite having a long list of positive attributes, such as a net cash position, real estate that can be monetized, strong free cash flow generation, and a high dividend payout (with low risk of a dividend cut). Lastly, Coach may potentially become an acquisition/merger target for a competitor, luxury conglomerate or even private equity.
About the instructor:
Chris Swasbrook is Managing Director and Portfolio Manager of Elevation Capital Management Limited a global investment manager based in Auckland, New Zealand. He was previously a Partner of Goldman Sachs JBWere Pty Limited and Co-Head of Institutional Equities at Goldman Sachs JBWere (NZ) Limited. Chris is a member of the NZX Listing Sub-Committee and a member of the NZ Markets Disciplinary Tribunal. He is also a Director of NZX listed – Mowbray Collectables Limited. Chris graduated from The University of Auckland with a BCom (Economics) in 1995.
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