Over the years I've watched the December markup become the early December markup become the late November markup and now we have the S&P up 5% for November. I would not be so ultra-confident that December will be such a breeze - shorts have stampeded everything higher this month, most hedge funds I know are super-long and sentiment is through the roof. Normally, the market waits for everyone to get on the same side of the trade (kind of like COH, actually), and then it dishes out alot of pain. If you polled 100 investors today, 99% would call for a +5% December (with higher beta indicies +10%-15%). That kind of consensus is almost always wrong. I think you just got that move, and when hedge funds see that the December mark-up isn't coming, and they had better get their shorts back on because clients want them to actually be hedged (imagine that) when they report 12/31 balance sheets, the market will start to crap out. Just because no one expects it (clearly, the COH board cannot even imagine it) means it might have better than even odds of coming to pass. At any rate, if it doesn't, I'll ride out the December mark-up - remember, COH isn't my only short (and I have a handful of longs as well).
i would agree with you. but why are you here now. holiday sales will be strong and japan sales will be stronger.
after jan/feb, you'll probably right, but i think most people feel that way. and that price is going to be higher than what you are looking at. it has increased by almost 25% since a month before last earnings call. and with positive market feedback with high targets, you'll see a new group enter with the hopes of attaining a quick return of 15% with a run to 40.
I thought I was on ignore? No matter. A couple of comments on that:
1. COH did do that, I agree. I happened to be long for part of that change. However, COH used to bill itself as "affordable luxury" because it made high-quality products with an average retail price in the $200's. However, now they make a product with much lower-quality (ask almost any regular COH consumer - the bags fall apart much more easily now than 2-3 years ago) and the average price point is the high $200's to mid-$300's. Still affordable versus Gucci or Fendi or Dior (although much less prestigious), but rising to the level where the marginal bag, if the consumer is getting pinched by gas prices or fuel bills or an uptick in their AR mortgage, will not get purchased. Higher prices and lower quality generally turn off consumers.
2. Competition is much more intense now. Kudos to COH, but their success has attracted tough competitors - Jones NY, Juicy (via owner Liz Claiborne), Dooney & Bourke, Cole Haan. The high-end bags have been around forever, but that was never really competitive with COH - a completely different market - but at the lower-end there is now intense competition for those consumers that want to buy 6 bags per year.
3. I've seen Wall Street get really excited about short-term market momentum, on the upside and downside. Right now, you longs feel great - it has been a warm Fall, so fuel prices have fallen, there is talk of an end to tightening by the Fed, the Holidays are coming up, etc. Now, if I fast forward to January or February - weather is cold, and fuel prices are much higher. It costs more to fill your tank and heat your house. Billions of dollars of adjustable rate mortgages start to re-price (up) in 2006, and the increases will be startling to most homeowners, many of whom are first-timers. The huge surge of liquidity from the government to help rebuild Katrina, which is boosting stocks now, will have ended. And there will have been 2 or 3 Fed hikes between now and then. Stocks will be substantially lower as well, queing off of all of these factors, and confidence will be down. Under that scenario, will women really rush out to buy 2 or 3 new bags? I am betting they won't. You guys watch the stock every day and think that whatever trend is in motion that day IS the trend - I look out 6 months and try to anticipate large moves down or favorable risk/rewards, and I think I have one here.
..."Too much pressure from my wife to buy her a bag for Christmas in addition to the bag she wants for everyday, in addition to the bags she already has!!"...
It's nice to know your wife's desire for Coach bags. Hope you make enough money from COH stocks to support that. :)
A little observation I have: with no exception, female I know have more than a dozen pairs of "current" shoes (shoes they wear often) but they used to have only a couple to a few "current" bags until they started to know Coach, then suddenly their attutide towards bags changed and now they have a few bags to go to work, and a bag to go to grocery stores, and a couple others for shopping, and a couple for formal occasions, and one for walking the dog, and on and on...
And that's what Coach did.
I'd have to back Nantucket a little.
I appreciate the opinions and the deep digging into the fundamentals that he provides. Unlike 99% of bashers, there is substance to the reasoning. I want to be aware of the Short-side thought process.
However, I come to a different conclusion. I am very confident in an upward price movement through December, and possibly into Feb-Mar depending on how high the price goes early.
Too much history of strong performance (sales of product and rise in share price) over the past 3-5 years.
Too much positive press.
Too much pressure from my wife to buy her a bag for Christmas in addition to the bag she wants for everyday, in addition to the bags she already has!!
I expect +30-40% over the $30 level of mid-October = $39-42 by March. Anything more is gravy.
As a note, I am buying call options rather than shares. I'll pick up the shares after selling the calls. More risk. But he who will not risk, can not win.
I for one appreciate your reasoning. being short is good for the longs, I don't wrap my ego around my positions. So I wish you luck as well, for one day you will also cover or you make no profit.