Buy - Price 33.60 on Oct. 20
by Wall Street Strategies

We're reiterating our Buy and [raising] our target to 42 on [high-end leather-goods purveyor] Coach after it posted earnings last Tuesday morning. The upwardly revised target price for the stock -- which assumes 23% appreciation within the framework of our rating methodology -- results from hikes to our fiscal-year 2010 and FY11 EPS assumptions. Presently, the stock commands a multiple to our revised FY10 EPS estimate, $2.10, of 16.2 times, [but has]...historically traded well north of a 25 times multiple. Coach's flexible supply chain and existing overcapacity overseas is yielding sourcing costs that are 8% lower versus FY09. Market cap: $10.6 billion.

A favorite holding is luxury goods makers Coach (COH). It may seem an odd choice in the current economic environment, which champions spending on essentials, rather than luxuries. "We believe that the odds favor a continued workout for the U.S. economy...the consequences are less-than-robust consumer spending," Coats admits. Recent data support that view. Although the recession appears to have ended at the close of the second quarter, surprisingly weak July retail sales served as a reminder that consumers won't be driving this recovery as they have in the past. In response, Coach has added pricing flexibility in the form of its new Poppy line, with lower-priced handbags in the $200 to $300 range. "Traditional luxury buyers are trading down to Coach," while usual Coach shoppers "are trading down to the factory outlet," he says. Coats also likes Coach's China prospects. The stock trades near $28.50, up 37% on the year. Coats picked it up for under $14 at the end of 2008.

Making me money

Cramer said we're seeing what he calls a "gasoline rally" in stocks such as Darden (DRI), Coach (COH), Tiffany (TIF), Sears (SHLD), Lowe's (LOW) and Yum! Brands (YUM).

"This is all the same trade that we saw when gasoline broke from $4 down to $2 last year," he said. "It's happening again." Read more here.

McHugh has been buying stock in high-end handbag maker Coach (COH) since the company has positioned itself well to profit in a weaker economy. Coach will soon introduce its Poppy line of lower-priced handbags, and its outlet stores are very profitable and starting to drive earnings.

High end product buyers don't care about price.

The languishing luxury-goods market showed some new life Tuesday when leather-goods maker Coach declared its first dividend. The New York City-based company (COH) also announced that sales were stabilizing at its North American stores. The upbeat announcements boosted the stock 15%. Coach will pay 7.5 cents a common share each quarter. Disbursement is set for June 29 to investors on its books June 8. The stock goes ex-dividend June 4. Chief Executive Lew Frankfort said that the dividend, which gives the stock a 1.34% current yield, "reflects our financial strength and our confidence in Coach's business outlook." Noting that the company generates significant cash flow and has virtually no debt, he added that "we are in a position to take advantage of profitable growth opportunities, while continuing to return capital to shareholders." Profits in Coach's third fiscal quarter (ended March 31) fell 29%, to $114.9 million, or 36 cents a share, from the level a year earlier. However, volume declined less than 1%, to $739.9 million. Comparable-store sales have now risen to pre-Christmas levels in North America.

Coach, a onetime highflier, today trades for about 21, or just nine times estimates for the fiscal year ending in June 2010. It had $406 million, or $1.22 a share in net cash -- or cash and equivalents minus total debt -- as of the end of September. Coach is well positioned in the handbag and accessories market, where its brand has long appealed to so-called aspirational shoppers; if the recession deepens, it could draw interest, as well, from the former buyers of four-digit "it" bags.

I love their merchandise.

I would think handbags would eventually get played out, but what do I know?

GOTTEN WAY AHEAD OF ITSELF-SHORT NOW!!!

dropped huge after purchase

Coach is too last year. Store traffic has increased because of holiday shopping but they are having to discount very heavily to move merchandise. I recently received coupons for 50% off all Coach merchandise, thats how scary consumer spending is these days

Coach has topped out.

good at branding but the downside is that it does not really produce luxury items

too quick a ise over past 6 months. Not as fancy as Italian or French fashions

When it comes to stocks, too much "love" is a bad thing. To those who already own Coach, hang on. To those who want to buy Coach, save your pennies and wait for that big bad bear to knock the stuffing out of this preppie little teddy.