Coach Margins Could Make it a Takeover Target for Private Equity Firms (COH)

With attractive margins and a low valuation, gift and accessory producer, Coach, Inc.(COH) may be a potential takeover target for private equity firms.

Coach shares have dropped -17% since Michael Kors (KORS) became a public company in 2011. The company said in January that it was unable to maintain market share for the first time during the quarter. Fierce competition from company’s including Michael Kors, Tory Burch LLC and Fifth & Pacific Cos.’s Kate Spade. At the same time, KORS saw a revenue growth four times the revenue growth of COH.

Despite the competition, COH’s profit margin of 23.5% and operating margin of 35% last quarter beat every one of its competitors. The company’s low valuation makes it’s a target for a takeover.

According to Atlantic Equities LLP, equity firms including, LVMH Moet Hennessy Louis Vuitton SA (MC) and PPR SA may be inclined to consider a takeover of the company. The company’s margins as well as its international growth opportunities may be attractive to potential buyers.

Coach shares were up 47 cents, or 0.95% during premarket trading Tuesday. The stock has declined -35% in the past year.

The Bottom Line
Shares of Coach, Inc.(COH) have a 2.44% yield, based on Monday’s closing price of $49.28.

Coach, Inc.(COH) is not recommended at this time, holding a DARS™ Rating of 3.3 out of 5 stars.
Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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