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Has Coach, Inc. (COH) Become the Perfect Stock?

For years, luxury retailers bucked the recessionary trend, with high-end shoppers having the wealth to sustain their shopping patterns, even in a weak economy. In addition, both Coach, Inc. (NYSE:COH) and luxury jewelry retailer Tiffany & Co. (NYSE:TIF) benefited greatly from emerging-market growth, as a rising consumer class sought to buy up their high-status products.

But recently, Coach has finally seen tough times catch up with it. In its most recent quarter, Coach fell well short of expectations in terms of both revenue and earnings, and the stock has sold off sharply in response. Competitors Michael Kors Holdings Ltd (NYSE:KORS) and Ralph Lauren Corp (NYSE:RL) have fared much better than Coach by pitching themselves as so-called lifestyle brands, allowing them to sell a wider array of products, and taking maximum advantage of the value of their brand names. By contrast, Coach’s Legacy handbag line didn’t pay off the way the company had hoped, and a strategic shift toward women’s apparel and accessories could erode Coach’s big margin advantage over Tiffany, Kors, and Ralph Lauren.

One big challenge that Coach, Inc. (NYSE:COH) will soon face is the departure of CEO Lew Frankfort, who will step down next year. With so much of the company’s success having come on Frankfort’s watch, Coach will need to demonstrate its ability to keep its customers happy.

For Coach to improve, it needs to focus on finding new avenues for sales growth. If the company can boost revenue, then Coach could hurdle past the remaining obstacles to reach perfection.

The article Has Coach Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Coach. The Motley Fool owns shares of Coach.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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