Coach Inc. (COH), the well-known high-end handbag maker, said 15 November it is looking to China for overseas growth while expanding in its main Japanese and American markets. China is currently experiencing well-documented growth. It is estimated Chinese construction companies are building the equivalent of Houston or Philadelphia every month.
Coach is hoping to build a retail presence in China to take advantage of the growing market and consumer affluence. The company has plans to open 10 new retail stores over the next two years; it currently operates 13 stores in Hong Kong.
CEO, Lew Frankfort, recently stated, “Our product is checking really well with the Chinese consumer. That is music to our ears. That’s one of the reasons we’re ramping up the number of stores that we’re opening to 10 in the next two years. We’ve also seen this in other markets, which I actually had an opportunity to visit about three weeks ago in both Taiwan and Korea where our businesses are surging, an incredible interest on the part of these consumers for Coach.”
Coach has a large presence in Japan, where it currently operates over 120 stores and has a 9% market share. The planned expansion will bring over 180 stores to Japan and over 300 stores to the US. Currently the stock is hovering around a 52-week high of over $44 a share.
A more cautionary tale is offered by Mad Money’s Jim Cramer who recently stated in his televised lightning round, “You know I said take profits, right here. It’s now at 43. I cannot justify a new purchase at 43.”
Company Profile:
Coach’s primary product offerings are handbags and a number of accessories such as wallets, gloves, and tote bags. The company’s products also include footwear and eyewear. Coach sells its products directly to the consumer through its boutique stores, factory outlets and website. Coach also licenses its products to be sold indirectly in department stores. Coach, Inc. was founded in 1941 and is based in New York City.
A Potential Trade:
Looking at January 2007 covered calls, on PowerOptions’ powerful option chain tool, identified the following trade:
| Coach Inc. (COH) $ 43.76 (43 days) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Expiration/Strike | Opt. Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| COHAV | 07 JAN 42.5 | $2.65 | 6.10% | 3.40% | 3.40% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Coach in-the-money covered calls stock options position provides outstanding 6.10% downside protection (so even if Cramer’s right, you’ve got room to breathe) and a solid potential profit if unchanged or assigned of 3.4%.
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[tags]China, Houston, Philadelphia, Hong Kong, Lew Frankfort, Chinese, Taiwan, Korea, Japan, Mad Money, Jim Cramer, lightning round, New York City, COH, Coach Inc., covered call investment strategy, investment strategy, iron condor, option income, poweroptions, selling naked puts, stock option trading, stock options[/tags]