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Sector: Consumer Discretionary
          [Type text]
Sub-Sector: Apparel, Accessories & Luxury Goods

 Intrinsic Value           Current Price      52 Week High - Low          Beta         P/E        Market Cap               Dividend Yield
          $63.00                $52.52         $53.30   -    $32.96       1.44         20.08     $15,57B (Large Cap)          0.58%
  Investment Thesis                                                      Competition:
  Retailers entered 2010 with significantly improved balance sheets,      COH’s major competitors are:
  and they are surveying the environment in search of the next new           Privately held: Michael Kors; Dooney & Bourke, Kate Spade.
  “thing” to excite and attract still-cautious shoppers. Boots, shoes,       Public: Tiffany’s; Liz Claiborne
  and accessories are trending better than apparel and are a good        Pros:
  “statement” piece— enabling consumers to refresh their wardrobes          Strong market potential in North America due to low
  without apparel purchase.                                                    competition
   Although consumers remain skittish and highly value focused,             Strong globalization strategy with presence in Europe, Japan
  shoppers have opened their purse strings for merchandise that is             and China; company plans to open over 30 new stores in 2011
  differentiated and at a “fair” price.                                        in China
  Business Summary                                                          New line of small bags to be introduced in 2011; new products
  Coach, Inc. is a designer, producer, and marketer of high-quality            dedicated to men have increased revenues coming from Japan
  modern American classic accessories. Primary product offerings            Management has been able to design for each price level and
  include handbags, women’s and men’s accessories, business cases,             use sourcing to largely offset commodity prices
  luggage, leather outerwear, gloves, scarves, and personal planning        The company repurchased $137 stock in the first fiscal 2011
  products. Coach operates 441 North American stores (including 111            quarter
  factory outlets). Direct-to-consumer channel accounted for nearly         Increasing global brand recognition due to positive
  84% of total net sales in fiscal 2009; Indirect channel,(16%).               management strategy (by region marketing and pricing
  Founded in 1941, COH has over the past several years transformed             strategies)
  the Coach brand, building on its popular core categories by               Profitability and productivity ratios are double those if its
  introducing new products in a broader array of materials, styles and         specialty peers
  categories. The company has also implemented a flexible sourcing       Cons:
  and manufacturing model, which it believes enables it to bring a          The stock has sharply increased in the last month
  broader range of products to market more rapidly and efficiently.         Risk associated with sourcing, fashion trends, sharp decrease in
                                                                               consumer spending
  Industry Trends                                                           The firm rebalanced its product offering providing a wider
   Increased spending coming from the consumers with                          assortment of handbags in the $200-$300 range, a shift from its
     households income of more than 50,0000; trend towards luxury              previous strategy of trying to broaden the assortment of
     goods                                                                     handbags at higher price points, in the $300-$400 range.
   Three areas of interest will receive particular attention in 2011:   Value Line Est.: $65.00-$95.00
     sustainability, social media, and globalization.                    (2013-2015)
   Increased sales during holidays season                               Value Line Real Annual Return: 8%-
                                                                         Morningstar Overall Rating: Three Stars
                                                                         Assumed inflation                         3%
                                                                         ROIC                                      45.10
                                                                         ROA                                       31.17%
                                                                         ROE                                       45.75%
                                                                         Assumed P/E                               17.84
                                                                         Expected sales growth                     13%
                                                                         Price/Book                                9.8
                                                                         Debt to Equity                            3.72
         (yahoo finance)                                                 Ev/EBITDA                                 7.8x
  Comparable Ratios1:                                                    10 yr. Risk Free Rate                     2.7%
      Yahoo Finance as of November 18, 2010                              Risk Premium                              3.5%
                                       COH      PVT1    Industry         WACC                                      8.9%
      Market Cap:                   15.57B        N/A   380.26M          From: Thomson One Banker (Reuters), Morningstar, S&P Net Advantage
      Qtrly Rev Growth (yoy):       19.70%        N/A     9.20%          Report Prepared By:
      Revenue (ttm):                 3.76B     6.20M1   486.15M          Oana Dancescu
      Gross Margin (ttm):           73.44%        N/A    40.15%          11/18/2010
      EBITDA (ttm):                  1.34B        N/A    46.45M
      Operating Margin (ttm):       32.27%        N/A     9.94%
      Net Income (ttm):            782.99M        N/A        N/A
      EPS (ttm):                       2.52       N/A       1.38
      PEG (5 yr expected):             1.19       N/A          1

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