Despite the lukewarm holiday season, Coach is planning to increase global square footage at least 10% during the 2013 calendar year. The company has a global presence, and management is investing in the business. On a bright note, Coach’s men’s line is on track to grow 50% globally this year.
Wall Street agrees that Coach is capitalizing on growth opportunities and recommends purchase of the stock. Management is in the process of transitioning its luxury business into a “global lifestyle brand,” suitable for both men and women.
With respect to the upcoming Consumer & Retail Conference, I will be looking for management to give greater clarity on the North American business. The company is scheduled to release third quarter earnings in the latter part of April.
Barron’s Magazine also wrote positively on Coach in its Feb. 24 issue, stating that the luxury goods maker has higher operating margins and a better valuation than competitor Michael Kors Holdings Ltd (NYSE:KORS). Coach’s fiscal year will end on June 29, 2013.
Yum! Brands, Inc. (NYSE:YUM)
Wednesday, March 13, 2013 at 12:00 p.m. EDT
Yum! Brands is an international quick service restaurant operator with more than 37,000 restaurants in 120 countries. Investors have traditionally considered Yum! a growth stock with its emerging markets exposure in large countries such as China.
The owner of KFC, Pizza Hut, and Taco Bell reported fourth quarter earnings back on Feb. 4. While the company reported higher-than-expected EPS and revenue, Yum! Brands, Inc. (NYSE:YUM) stated that same-store sales in China fell 6% during the fourth quarter. In particular, Yum! Brands, Inc. (NYSE:YUM) became a victim of reports that Chinese poultry had too many chemicals, causing sales to sharply decline in the latter part of December.
CEO David Novak advised investors on the conference call that his company no longer expects to achieve earnings growth during 2013, after multiple-years of achieving double-digit growth. The disappointing news caused shares to fall nearly 6%, but the stock has recovered the losses in full going into Bank of America Corp (NYSE:BAC)’s conference.
My main concern for an investment in Yum! is limited visibility; therefore I will be looking for management to adopt a more positive tone with greater clarity during the upcoming presentation.
Foolish Bottom Line
I would be a buyer of Carter’s and Coach following Bank of America Corp (NYSE:BAC) Merrill Lynch’s Consumer & Retail Conference. Carter’s is developing a competitive advantage within children’s apparel, and the valuation on Coach is attractive for long-term investors.
In contrast, I would be a seller of Yum! Brands, Inc. (NYSE:YUM). Recent data indicates that Chinese economic growth is the weakest since 2009, therefore I am not a buyer of the China growth story.
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The article Watch These Stocks at Bank of America Merrill Lynch’s Consumer & Retail Conference originally appeared on Fool.com and is written by John Macris.
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