PP

Aspirational luxury brand Coach (click ticker for report: ) announced lackluster results for its fiscal year 2013 second quarter and the holiday season. Revenue increased just 4% year-over-year to $1.5 billion, short of consensus expectations. Earnings missed the mark by several cents, growing just 4% year-over-year to $1.23 per share. Our fair value estimate remains unchanged. Gross margins remained basically unchanged year-over-year at 72.1%, suggesting the company did not take markdowns during the quarter. Unfortunately, the firm’s 4% sales expansion trailed the 15% increase in inventories, which could indicate that markdowns may come eventually. We could see a gross margin figure meaningfully lower than the current low-70’s run-rate in the coming periods. Inventory growth was among the primary reasons why … Read more