Tapestry Inc. (TPR)

This is gone through a respectable 1^st round of recovery. They’ve renovated about 500 stores and are planning to renovate a couple of more. They’ve removed their products from about a quarter of the Department stores, and have reduced the number of promotions/sales which has helped their profit margins. These are entry-level luxury items, and people only buy 1 or 2 of them, unless they expand their offerings. They are not buying 4 or 5. Not sure where the growth is going to come from. Feels the easy money has already been made.

They recovered by renovation of stores to freshen things up. Removed product from about a quarter of their retailers. They reduced the number of discounts they have had. Their focus is to get back on track of being a premium brand. Don’t be in a rush to buy it.

He would be reluctant to put it in his portfolio given the competition and the decline in foot traffic in the US. The valuation and long term growth potential keeps him out of it. Prefers TJX-N.

He does not think it is coming back. It does not have the same depth as a Chanel, for example. After the consumer buys the first one, they are less interested to buy the second one. KOR-N is similar.

This is having a real hard time. They have fallen out of the consumer’s eye of being the luxury brand that they once were. Once you lose that momentum, it is very difficult to regain it. Sales are down 21% year-over-year in North America. Recently did an acquisition of Stuart Weitzman, a luxury shoemaker, and spent $550 million. Not quite sure how this acquisition is going to help them sell more Coach purses. The good news is that sales in China have been picking up, but not nearly enough to offset what they’ve lost in the US. Given the slowdown in sales in the US, they have had to cut prices to move inventory, and by cutting prices, margins have also shrunk.

J C Penney (JPC-N) or Coach (COH-N)? This is the one that he would buy. It is a really well run company with a great yield of 3.8%, and trading at 19X earnings. Had some real problems on the North American side on same-store sale numbers that they are trying to improve. Very good management and no debt. Have a really good opportunity to grow their brand internationally, especially in emerging markets.

He would never buy a fashion company. Things change so fast. The metrics on this company are quite attractive, but earnings are going bust.

J. C. Penny (JCP-N) or Coach (COH-N)? Recently sold his holdings.

The whole fashion industry is a tough one. This was everybody’s darling for many, many years, but he thinks a little bit of the lustre has come off. He would be very hesitant to step in right now. Huge competition. They started to expand their market beyond bags, and have competition in that area. Valuation is still fairly rich even though the stock has come down.

Everyone knows the brand. He owned the stock in the past. Where is the demand going to come from: as you start to see some improvement in the labour market you will see the high end come back again. A year to a year and a half from now it should do well again. Nice yield. KORs has also done very well here. Both stores are quite busy. CCH has the dividend.

(A Top Pick March 20/13. Up 2.42%.) Sold his holdings in October 2013 when he noticed they were getting their lunch eaten by Michael Kors in the US. Doesn’t feel this is a bad company. Has a very, very solid balance sheet.

Still a great company. This was such a great story for the longest time. From what he understands, their issue is that to some degree they have diluted their brand. Counterfeiting of Coach is rampant in Asia. They have also been known to do very large sales on their goods, which has cheapened their cachet. You have to be very careful on this name.

Used to own it. Strong market share in China. Because of volatility about a previous quarter, he sold. They are losing market share fairly aggressively in the US. Until they are able to stabilize market share losses, he would be against, hesitant into the name. If you own it, take some profits off the table. December was a tremendously difficult month for retailers.

(Top Pick Feb9/13, Up 17.49%) Not as good as he had hoped. Bought for the Asian exposure. He is watching it closely and if it doesn’t gain momentum, he might switch for something that might do better.