Rupal Bhansali presented her in-depth investment thesis on Coach (NYSE: COH) and Tumi (NYSE: TUMI) at Wide-Moat Investing Summit 2014.
Coach: Continues to dominate the accessible luxury handbag category despite increased competition (Michael Kors and other premium lifestyle brands). Management has acknowledged recent missteps and is well along the way in terms of fixing the problems (new designer Stuart Vevers with a heritage in designing luxury handbags at Mulberry and LVMH; product: increased newness, broadened assortment and redesigned collections; new pricing strategy: launched higher quality, higher price point merchandise, reduced promotions; revamped distribution: reinvigorated retail channel via redesign, changed wholesale account management; increased marketing spend: $50 million on personalized marketing campaigns on loyal customers). While execution risk is high, there is light at the end of the tunnel (highly profitable and growing franchise in Asia; white space potential in men’s collections, footwear and outerwear; brand repositioning from handbags to broader lifestyle assortment; and lucrative category exposure – end market is growing and very profitable). The recent valuation, including a strong balance sheet, provides a very attractive risk-reward for this out-of-favor equity (especially versus competitor and investor favorite Kors).
Tumi: Travel and business products leader with a business model built on: 1) design excellence; 2) functional superiority; and 3) technical innovation. Missed earnings guidance since going public in 2012 has created distrust among investors and led to an attractive recent valuation. The brand is only in the “early innings” of its global expansion potential in a fragmented category (market share wins can drive growth). At $20 per share, the valuation is attractive, especially relative to Samsonite, the investor favorite in the sector.
About the instructor:
Rupal Bhansali is the portfolio manager for Ariel’s international and global strategies and oversees the entire research effort of these offerings. Additionally, she is responsible for covering the financial and retail sectors. She joined Ariel after spending 10 years with MacKay Shields where she was senior managing director, portfolio manager and head of international equities. During her tenure, Rupal successfully managed both institutional and retail portfolios. Prior to joining MacKay Shields, Rupal was portfolio manager and co-head of international equities at Oppenheimer Capital where she co-managed international and global equity portfolios. She has also held various roles at other investment firms since she began her career in 1989, including Soros Fund Management. Fluent in several Indian languages including Hindi, Rupal earned a Bachelor of Commerce in accounting and finance, and a Master of Commerce in international finance and banking from the University of Mumbai, as well as an MBA in finance from the University of Rochester where she was a Rotary Foundation Scholar.
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