Coach's Turnaround Impresses, Macro Concerns Loom Ahead Of Earnings

Coach Inc COH is scheduled to report its fiscal second quarter results after Tuesday's close and there is plenty of data points to look out for.

According to Dave Weiner of Deutsche Bank, Coach's stock has remained relatively flat since its fiscal first quarter report. Since then, the brand experienced meaningful outperformance through Black Friday driven by hopes of same-store sales momentum, followed by underperformance since mid December and now concerns over a potential border tax.

Here's what the analyst is looking out for in the upcoming print.

North American Comps

Coach's North American comp has been positive for two quarters and the company's fiscal 2017 guidance implies a low-single digit trend for each of the fourth quarters.

Meanwhile, many retailers reported disappointing holiday comps performance. However, Coach's transformation initiatives has been yielding results as of late but the analyst's store checks noted same/more traffic and similar spending year-over-year.

Weiner will be paying close attention to see if North American comps continued to track positive in the most recent quarter at a time when department stores, such as Macy's Inc M singled out continued weakness in the handbag category throughout the holiday season.

M&A

Reports have surfaced that Coach, among other potential players, is interested in acquiring rival Kate Spade & Co KATE.

The analyst noted that Kate Spade's product line may be a fit for Coach's brand - at least more of a synergistic fit compared to Stuart Weitzman which the company acquired in 2015.

Shares of Coach remain Hold rated with an unchanged $43 price target as the stock's current 17x next 12-month P/E is keeping the analyst sidelined.