Coach Incorporated Security Analysis Paper
Coach Incorporated Security Analysis Paper
Coach Incorporated is a company established in 1941in Manhattan. Coach is in the fashion industry and this accessories manufacturer is one of the best known brands in North America. Coach was bought out by the Sara Lee Corporation in 1985 and started being publicly traded in 2000 on the New York Stock Exchange. Coach Incorporated prides it selves off of being one of the most dependable, unique, desirable, and fashionable brands in their industry. Coach has a disadvantage with its competition, being the only one publicly traded. It does not have access to the others financial records. Coach Incorporated likes to stick to tradition, whether it is in their designs or their Executive officers.
Coach has a very diverse and experienced Executive team. Coach also just started a litigation campaign in 2009 called “Operation turnlock” to try and help with the counterfeit problem. They were recently award a large sum of money from one of the lawsuits the campaign filled for online counterfeit merchandise. Coach recently just gave $2 million to the Hurricane Sandy Relief Fund to help rebuild the community where Coach got its own start. Coach’s financial records are in order and are continuing to grow steadily even through the rough economy.
Coach Incorporated (Coach) is a company that designs and manufactures leather goods as well as other accessories. It was founded in a Manhattan loft in 1941 as a family-run workshop. This family used skill passed down from each generation to create a unique style that became quite desirable to consumers. (“Coach est. 1941,” 2010) In 1985 Coach was purchased by Sara Lee Corporation. Also, in 2000, Coach as Incorporated in the state of Maryland and listed on the New York Stock Exchange for approximately 68 million shares. Their mission statement is “Coach seeks to be the leading brand of quality lifestyle accessories offering classic, modern American styling.” In today’s world, Coach is large company that still retains high standards and craftsmanship for their leather goods.
They manufacture items such as purses, suit cases, wallets, watches, accessories, shoes, jewelry, sunglasses and etc. Some of these items are manufactured through their licensing partners. Such as Estee Lauder Companies Incorporated is Coach’s fragrance licensing partner. (“Reuters: Profile, coach,” 2012) The Coach brand has ‘established a signature style and distinctive identity’ (“Coach Est. 1941,” 2010) that almost everyone can recognize, which is why their prices reflect more of the name than the quality of the items. Coach is in the fashion industry and enough people are willing to pay for the name brand of Coach to keep them in business and to keep the prices high.
The market the Coach is in is the fashion market, and their customers are middle to upper class men and women. Because their prices are high the market for their items has to be to a household that has extra money to spend and even though they sell mostly women related items they do sell men’s’ as well. Their competition includes Louis Vuitton, Fendi, Gucci Incorperated, Dooney and Bourke Incorporated, Katie Spade LLC, and Michael Kors Incorporated which are all privately owned companies. (“Yahoo finance,” 2012)
Coach operates in two different ways, direct to customers and indirect. Indirect is where Coach sells their products to other retail stores and direct to customers is selling out of their own stores. Coach has over 500 stores in the United States and Canada as of June 30, 2012. They also have over 300 locations in Japan, China, Singapore and Taiwan. They have recently acquired new locations in Malaysia and South Korea in July and August. (“Coach est. 1941,” 2010) Coach not only has their own retail stores, but also sells their merchandise through department stores and specialty retailer locations.
With these locations, Coach is also present in Europe, Asia, and Latin America. As of 1999 Coach launched their first on-line store available to customers in the United States, Canada, and Japan. They also have informational websites in twenty other countries. In the future, Coach plans to increase international distribution and target international consumers, especially in Asia. They also plan on staying one of the most popular name brand accessory companies in North America. (“Coach est. 1941,” 2010)
Coach also has very high standards for their brand. Coach states that “The Coach brand represents a unique synthesis of magic and logic that stands for quality, authenticity, value and a truly aspirational, distinctive American style.” (“Coach est. 1941,” 2010) They hold accountability to their customers. They also guarantee great service and that their customers’ needs are always met. Coach seeks long term relationships with all their costumers by treating them this way. This is one reason Coach is still around and doing well as a company even with their high prices. They are dedicated to their honesty, trust, satisfaction, and fairness to their consumers, business, and community. They strive to increase consumer and shareholder value. (“Coach est. 1941,” 2010)
They have a small number of executive officers with only seven. First on the list is Lew Frankfort the Chairman and Chief Executive Officer. Mr. Frankfort joined the Coach company is 1979 as Vice President of New Business Development. Mr. Frankfort has appointed President of Coach in 1985 and named Chairman and CEO in 1995. When Mr. Frankfort started at Coach, Coach’s sales were about $6 million. Today Coach’s sales are $4.8 billion. He has seen many changes with this company, such as seeing it go to a publicly traded company on the New York Stock Exchange in 2000. Before joining Coach, Mr. Frankfort held positions in the public sector in New York City.
He holds a Bachelor of Arts degree from Hunter College, and a MBA in Marketing from Columbia University. He also holds a spot on the Board of Overseers of Columbia’s Business School. Mr. Frankfort was recognized by Barron’s from 2005-2008 as one of 30 “Most Respected CEO’s” globally. (“Coach est. 1941,” 2010) Having someone that has been in the same company for 33 years now running it, says wonders about Coach. Coach is a brand that sticks to what it knows and does not change something that is working for them. Just like their products, Coach’s president is what they seek in their mission of keeping everything classic.
Next, is Reed Krakoff, the President, Executive Creative Director of Coach and has been employed at Coach since December 1996. He was initially hired as the Vice President and Executive Creative Director, but advanced to his current position just two and a half years later. Mr. Krakoff has a degree in Fashion Design from Parsons School of Design. Prior to Coach, Mr. Krakoff held various positions at Anne Klein, Ralph Lauren and other design houses. In 2007 Mr. Krakoff was elected vice president of the Council of Fashion Designers of America, and in 2001and 2004 he was awarded the honor of Accessories Designer of the Year. To this day Mr. Krakoff styles and photographs the campaigns for Coach. (“Coach est. 1941,” 2010) Having a man like Reed Krakoff on the Coach team ensures that they will have some of the most elegant designs in the industry today. His ability to create pieces that Coach would gladly put their name on ensures him a long career at Coach.
Following is Jerry Stritzke, the President and Chief Operating Officer as of March 2008. Prior to Coach he joined Best, Sharp, Sheridan, & Shritzke in 1985 as a partner. In 1992 he practiced law at Stritzke Law Office. From 1993 to 1999 Mr. Stritzke was a consultant for Webb and Shirley. Lastly, Mr. Stritzke held several senior executive positions within limited Brand Incorporation, from 1999 to 2007. Jerry Stritzke has a Bachelors of Science from Oklahoma State University and a Juris Doctor from the University of Oklahoma. (“Coach est. 1941,” 2010) Next is Michael Tucci the President, Retail Division in North America. Mr. Tucci joined Coach in 2003 with over twenty years of experience. Before Coach, he was the Executive Vice President of Gap Incorporated and held various senior leadership positions from 1994-2002.
Michael Tucci also held executive positions at R.H. Mary Corporations from 1982-1992. Mr. Tucci has a Bachelors of Arts in English from Trinity College. (“Coach est. 1941,” 2010) Next, is Todd Kahn the Executive Vice President, General Counsel and Secretary since he joined Coach in 2008. Prior to joining Coach Todd Kahn held multiple positions for Calypso Christian Celle, Sean John, Accessory Network, InternetCash Corporation, Salant Corporation, Fried, Frank, Harris, Shriver, and Jacobson. Mr. Todd has a Bachelors of Science from Touro College and a Juris Doctor from Boston University Law School. He also serves on the board of Directors of the Fashion Institute of Technology Educational Foundation the Fashion Delivers \Charitable Foundation Incorporated, and the National Father’s Day Committee. (“Coach est. 1941,” 2010)
Next is Sarah Dunn the Executive Vice President, Human Recourses since 2008. Previously Ms. Dunn held several executive positions with Thomson Financial, including Executive Vice President, Human Resources and Organizational Development. Ms. Dunn is also a consulting Advisory Board member of Youth, I.N.C. She also has a Bachelors of Science Degree in Human Sciences from University College, London, U.K. and a Masters Degree in Information Science from City University, London. (“Coach est. 1941,” 2010)
Lastly, we have Jane Nielsen the executive Vice President and Chief Financial Officer since 2011. Jane Nielsen joined Coach after working at PepsiCo, Incorporated and the Global Nutrition Group as their Senior Vice President and Chief Financial Officer since 2009. Prior to this Ms. Nielsen held senior positions in a financial role with PepsiCo, Incorporated, and Pepsi Bottling Group from 1996-2009. From 1990-1996 Ms. Nielsen worked for Marakon Associates and from 1986-1990 she worked at Credit Suisse First Boston. Ms. Nielsen has a BA in Economics from Smith College and an M.B.A. from Harvard Business School. (“Coach est. 1941,” 2010)
Coach has recently been awarded $257 million in a lawsuit against counterfeit Coach merchandise. Coach obtained a default judgment in Illinois Federal Court against individuals and businesses that operate websites selling counterfeit Coach merchandise. The judgment granted Coach 573 internet domain names from which the counterfeit merchandise was sold from. Coach started a litigation campaign called “Operation Turnlock” in May 2009. Since then, Coach has filed lawsuits to stop counterfeit items from being sold. From these lawsuits, Coach has gain a significant amount of monetary value from them. (Chaudhuri , 2012)
Coach also just donated $2 million to the Hurricane Sandy relief efforts. The gift was made to the Red Cross Disaster Relief Fund for rebuilding efforts in the Tri-State area. Coach as also made its employee matching program available, so however much its employees contribute to the American Red Cross Disaster Relief Fund or to other qualified funds, Coach will match the donation Lew Frankfort made a public address saying “Our hearts go out to the countless number of people affected by the storm.” Since Coach was established in Manhattan, they feel they need to help rebuild their community where they started. (“Coach est. 1941,” 2010)
In 2011 Coach’s Inventory broke down to 63% handbags, 27% accessories, and 10% all other products. This is just a little change from the previous year, where the only difference is 1% moved from accessories to all other products. Currently Coach pays quarterly cash dividends of $0.225 per share. Coach’s cash flow statement shows Net Income for 2011 to be $880,800,000 and the net cash flows provided by operating activities in 2011to be $1,033,271,000. Also, the cash flow statement shows the net cash used in investing activities to be -$59,631,000 and the net cash used in financing activities to be -$875,126,000 in 2011. For the Cash and cash equivalents at end of year 2011 were $699,782,000 with the cash paid for income taxes for 2011 to be $364,493,000 and cash paid for interest for 2011 to be $1,233,000. Lastly, the cash flow statement has for 2011 is the noncash investing activity-property and equipment obligations to be $23,173,000 and $0 for the noncash financing activity-mortgage debt assumed.(“http://www.annualreports.com/company/2246 ,” 2011)
Coach just reported its first quarter earnings per share in 2012 to be $0.77. Compared to the previous year, same quarter, the earnings per shares was $0.73. Their sales reported for 2012 first quarter, which ended September 29, 2012, was $1.16 billion. Compared to the previous year where Coach’s sales for the same quarter was only $1.05 billion. This is an 11% increase in sales in just one year. Coach also announced that its Board of Directors has just authorized the repurchase of up to $1.5 billion of its outstanding common stock by June 30,2015. This will make Coach’s earnings per share increase since there will be less outstanding stock. Since we now know the earning per share for Coach we can calculate the price earnings ratio. Coach’s current stock price $57.87. So, Coach’s price earnings ratio is 75.156. (“Coach est. 1941,” 2010)
Stockholder’s equity is total assets minus total liabilities. For Coach, in 2011 the total assets are $2,635,116,000 and the total liabilities are $1,022,547,000. So, the total stockholder’s equity for the year ended July 2, 2011 is $1,612,569,000. For the total liabilities of Coach being $1,022,547,000 only $593,017,000 are current liabilities. Of the current liabilities $118,612,000 is accounts payable, $473,610,000 is accrued liabilities, and $795,000 is current portion of the long term debt. As for the rest of the liabilities $23,360,000 is long term debt and $406,170,000 is other liabilities. (“Coach est. 1941,” 2010)
These numbers first mean that Coach is a continuously growing company that would be labeled at a value company. Which means it doesn’t grow fast, but instead it grows consistently. Also, since its assets and equities make up the majority of Coach’s finances the company appears to be in good standings. Coach is a company that has been around for over 70 years and has been traded publicly for 12 years now, and it seems to have all its finances in order and look like what you would expect for a high-end retail company. There is a bright future for Coach with its experienced executives leading the company to expand its market and try to bet out the competition.
The volatility of Coach stock price is reasonable. Obviously people are willing to pay for Coach products even through hard times. Coach’s stock price continues to go up and from past records it has always steadily increased. Coach has a rich history and has been around for a long time so I do not see it crashing anytime in the near future, so I would say the stock price is valid and a good steady long term investment.
Coach est. 1941. (2010, February 3). Retrieved from http://www.coach.com/online/handbags/Home-10551-10051-en?isCollapse=true Reuters: Profile, coach inc.. (2012). Retrieved from http://www.reuters.com/finance/stocks/companyProfile?symbol=COH Yahoo finance. (2012). Retrieved from http://finance.yahoo.com/q/co?s=COH Competitors Chaudhuri , S. (2012, November 02). Coach gets $257 million, 573 domain names in counterfeiting lawsuits. Dow Jones Newswires. Retrieved from http://www.foxbusiness.com/news/2012/11/02/coach-gets-257-million-573-domain-names-in-counterfeiting-lawsuit/ http://www.annualreports.com/company/2246. (2011).
Subject: Balance sheet,
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 21 November 2016
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