Coach Got Crushed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: After an 11% drop in share price, Coach (NYS: COH) were looking just a little less luxe Thursday.

So what: Yet the catalyst for the day's sell-off seems tenuous in the extreme. Last week, a report on Chinese manufacturing showed contraction for the third month in a row. This in turn has pundits talking of a "cooling off" of China's red-hot growth pace, with a likely slowdown in middle-class consumer spending resulting as the country as a whole becomes less affluent.

Now what: As you can see, there's not a lot of hard numbers behind these theories so far. Barely even a direct connection between last week's report and this week's worries about how it might affect Coach, Tiffany (NYS: TIF) , and other luxury brands. Then again, with Coach shares trading for a lofty 18.5 times multiple to trailing earnings (and pegged for only 13.6% long-term growth) any hint of a slowdown -- even a slowdown that might happen sometime in the future -- may serve as an excuse for cashing in profits and selling off the shares.

Hmm. Did I say "may serve?" In fact, I think it just did.

Are investors overreacting to Middle Kingdom rumor-mongering? Will Coach regain its cachet?Add the stock to your Fool Watchlist, and find out.

At the time thisarticle was published Fool contributorRich Smithowns no shares of any company named above.The Motley Fool owns shares of Coach.Motley Fool newsletter serviceshave recommended buying shares of Coach. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.

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