Gadfly's Shelly Banjo: Coach Just Put On Its 'Big-Boy Pants'

Coach Inc COH has had its fair share of woes over the years, but now the fashion icon is firing on all cylinders.

According to Gadfly's Shelly Banjo, Coach's earnings report Tuesday signaled that the company has put on its "big-boy pants" and a multi-year long turnaround initiative is showing its mark today.

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Banjo noted that Coach's management made a smart move of leaving hundreds of department stores, closing weak stores, and relying less on selling discounted goods. At the same time, management convinced consumers to pay full price for its products, which signals a rebuilding of its image as a "true luxury player."

Moreover, Coach is sitting on $1.9 billion in cash which is up from $1.3 billion a year ago. The company's debt pile now stands at less than $600 million, which also marks an improvement from $900 million a year ago. As such, M&A activity is not only feasible but was highlighted by management as being a top priority.

In fact, sales of handbags with a price tag of at least $400 accounted for more than 55 percent of Coach's total handbag sales, up from 40 percent in the same quarter a year ago. As such, the company now has a clearer path towards becoming a "mini-conglomerate" that is similar to European fashion giants such as LVMH Moet Hennessy

Bottom line, Coach's earnings report shows progress in a multi-year path of "nursing its sick brand back to health." So long as the company stays its course, makes smart executive hires, and makes the right sacrifices on short-term sales for the long-term outlook, the brand is "setting itself up for future gains."

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