KORS

Coach’s Fundamentals Improving But We’re Growing Concerned About Dividend Amid Rumored M&A Talks

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Dividend Growth Newsletter portfolio holding Coach turned in a strong finish to calendar 2016, but we’re worried about rumored M&A activity. Let’s dig in. By Kris Rosemann We’ve been keeping a close eye on the speculative luxury goods ideas in the newsletter portfolios, and it hasn’t all been smooth sailing as Coach (COH) and Michael Kors (KORS) work to reposition their brands in the North American markets. Though we continue to see an opportunity for capital appreciation in shares of Coach (based on our fair value estimate of $41 per share), which is yielding ~3.7% at recent price levels, we’re growing concerned about the implications that M&A (if rumors come to fruition) will have on the long-term health of the … Read more

Around Retail: Aspirational Brands Battle Consumer Perception

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Summary · After positive data reads in the months of October and November, things may finally be looking up for retail spending, but the impact of discounting looms large for many in the space. There are pockets of weakness and strength. · Aspirational and luxury goods manufacturers and retailers are not only subject to the pressures of the promotional retail environment, but also are subject to additional outside forces such as tourism and brand perception. While not dead, mall traffic has been challenging. · Whether it is next-generation wearable technology, a refined online presence, a reduction in markdown allowances, or an enhanced shopping experience, luxury goods companies continue to invest for sustainable growth. Fossil and Richemont have been caught by … Read more

Retail Weakness: Blame the Election?

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Image Source: DonkeyHotey By Kris Rosemann The 2016 election cycle has been one characterized by unprecedented amounts of criticism and accusations, of both the personal and political variety, and it may be true that the perceived political environment from the view of the general public has not been in such a state of uncertainty for some time. Let’s not get into the details of who called whom what in last night’s Presidential debate, but some parents were reportedly not allowing their children to watch the debate out of fear that their values or outlook on democracy could be skewed. But could the uncertainty surrounding the election actually be enough to impact consumer activity at retail outlets and restaurants? Some are … Read more

Brand Image Taking Center Stage in Aspirational Goods

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By Kris Rosemann Coach (COH), Michael Kors (KORS), Fossil (FOSL), and Ralph Lauren (RL) all beat consensus estimates in the calendar second quarter of 2016, but the way the market reacted to the beats varied drastically despite none of the above firms necessarily issuing outright optimistic expectations. The weak outlooks have weighed on shares of Coach and Michael Kors, but shares of Fossil and Ralph Lauren have received an updraft in hopes of turnaround strategies and sales-decline stemming plans beginning to take hold.  Ongoing weakness in retail traffic across the US, and a decrease in tourism in major domestic cities have played an important role in the growing issues for luxury brands. In an attempt to combat traffic pressures, many … Read more

Fundamental Strength To Outweigh Short-Term Volatility

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Image Source: texasfeel Union Pacific Battling Declining Volumes We continue to be fans of Union Pacific (UNP) on a fundamental level, and we fully expect the company to be gearing up for material improvement further down the line as the end-markets it serves stabilize. Union Pacific reported weak quarterly results April 21, as operating revenue fell 14% from the year-ago period. The sharp drop was driven by an 8% decline in volume, as measured by total revenue carloads. Coal volume dropped 34%, industrial products volume decreased 10%, and agricultural and intermodal volumes fell in the low to mid-single digit range. Flat chemicals volume and automotive volume growth of 7% were no match for offsetting the other declines, and average revenue … Read more

Coach: Still On Path to Recovery?

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By Brian Nelson, CFA Why would we include Coach (COH) in the portfolio of the Dividend Growth Newsletter portfolio? This was a question we were asked quite frequently when shares had dipped into the mid-$20s, but we don’t hear it too much now with the company’s shares breaking north of $40 each. The company was added to the Dividend Growth Newsletter portfolio at $37.55 per share in September 2014, but the handbag maker has been paying a rather hefty yield since then, adding up to a respectable total return for the unique exposure within the context of a dividend growth strategy. The position in Coach had given us heartburn in the past, “Coach…Ouch! (April 2015),” and we weren’t exactly pleased … Read more

Your Hard-Earned Money

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By Brian Nelson, CFA It was Thursday afternoon, February 11, crude oil prices just hit a 13-year low, and the S&P 500 (SPY) was about to break below key technical support. Then, just as the markets were to fall further, rumors again emerged that OPEC may be scheduling a meeting to curb crude oil output, driving crude oil prices from the depths and the market higher off technical support. A barrel of crude oil continues to trade below the $30 mark, but it was quite the “save.” From where we stand, the market hasn’t been this fragile than at any time during the past decade or so, including during much of the Financial Crisis. Optimists may be whistling past the … Read more

Best Idea Michael Kors Up 20%+ — Yawn?

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“A significantly “undervalued stock” that is dropping like a rock is a huge red flag, and the Valuentum system offers a methodological overlay to incorporate the very valuable information contained in  share prices.” – Brian Nelson, CFA What a day for Michael Kors (KORS)! At the time of this writing February 2, shares of the aspirational brand are soaring 20%+. Yes, it is a holding in the Best Ideas Newsletter portfolio, “Valuentum’s Best Ideas Portfolio,” and yes, we added to the position in Michael Kors November 5, 2015, “Email Transaction Alerts.” The email transaction alert, which included some profit-taking in Altria and additions to the positions in Buffalo Wild Wings and Michael Kors, can be downloaded here. Prior to the … Read more

What’s Working in Today’s Market?

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By Brian Nelson, CFA As emerging markets around the world suffer from commodity-price-led economic weakness, capital continues to find a safe-haven in US government bonds (TLT, TBT), but for those equity-oriented funds that mandate a fully-invested status, not something we’re particularly advocates of, assets within US equities have favored “lower-beta” utilities (XLU) and consumer staples (XLP) sectors while cyclically-dependent and credit-levered sectors such as the financials (XLF) and materials (XLB) have suffered thus far in 2016. The industrials (XLI) and energy (XLE) sectors have also encountered higher-than-normal selling pressure in the first few weeks of the New Year, as investors evaluate the global economic landscape and what a prolonged period of low energy prices may mean for the lowest quality … Read more

Excited About Putting Cash to Work…Eventually

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Investors are fretting over a lot of things as of late. China (FXI) announced January 19 that fourth-quarter GDP fell to 6.8%, with many noting that the measure was a 25-year low. Even if you believe that number, which may be a stretch in light of collapsing local stock markets in Shanghai and Shenzhen, the outlook can’t be much better. Steel mills across the country are reeling, and while published housing numbers don’t look that bad, we have a difficult time believing the Chinese banks are in good shape. HSBC (HSBC), Standard Chartered, and Citigroup (C) remain most exposed to what we would describe to be the growing likelihood of a contagion from weakening commodity-dependent sectors in the country. Intel … Read more