Is Coach Inc (COH) Becoming a Fashion Faux Pas?

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By Carly Forster

Coach Inc (NYSE:COH) is a New York based American design house of luxury leather items. It is known for ladies’ handbags, men’s bags and small leather goods, as well as items such as luggage, briefcases, wallets and other accessories. The company recently announced that they are planning to close 70 stores in North America as sales are predicted to drop in the low double digits in percentage terms in 2014.

Coach Inc (NYSE:COH) stocks fell almost 9% on Thursday, June 19 due to their announcement and, as a result, were down again in pre-market trading on Friday morning. Despite their greatest efforts, the luxury retailer has been struggling to keep up with competitors such as Michael Kors Holdings Ltd (NYSE:KORS) and Kate Spade & Co (NYSE:KATE). In order to improve their performance, Coach has been actively focusing on international and online expansion as well as cutting back on discounts and sales. Coach Chief Executive Officer, Victor Luis, commented that the luxury retailer plans to also launch new advertising strategies and change its product offerings in an effort to improve sales.

Coach Inc (NYSE:COH) last released their quarterly earnings data on April 29 of this year. The retailer is expected to release their second quarter earnings report on July 29, 2014.

Shares of Coach opened at $35.00 on Friday, June 20. The company has a 1-year high of $59.58 and a 1-year low of $34.31. The stock’s daily moving average is $34.75 and has a 50-day moving average of $40.90. The market cap for Coach is $9.52 billion and its P/E ratio is 10.59.


On June 20, Wedbush analyst Corinna Freedman issued a Neutral rating for Coach Inc (NYSE:COH) with a $40 price target. She explained, “It remains to be seen whether or not that customer is going to come back to the store. They are relying a lot on merchandising. They are relying a lot on new products in September. But, that’s not going to be a quick turn. It’s going to be a very long turn.” Freedman has a +16.8% average return on all stocks and a 78% success rate in making recommendations.

UBS analyst Michael Binetti also issued a Neutral rating for Coach Inc (NYSE:COH) on June 20. He noted, “Coach’s plan embraces the urgency of the situation. [There’s] a lot of risk left to the story. Execution will be tough and the competition isn’t letting up.” Binetti has a +16.6% average return on all stocks and an 80% success rate in making recommendations.

On the other hand, on June 20 Nomura analyst Robert Drbul maintained a BUY rating for the stock, but cut his price target from $50 to $45. He reasoned the restructuring of the company as “comprehensive, strategic and bold.”While Drbul has a +3.7% average return on all stocks and a 63% success rate in making recommendations, he also has a -13.2% average return on Coach.

Separately, on June 23, Morgan Stanley analyst Kimberly Greenberger reiterated an Underweight rating on Coach Inc (NYSE:COH) and lowered her price target from $36 to $29. She said, “If working capital needs increase the cash burn will intensify….we expect COH adds debt to the balance sheet in order to fund these items and sustain dividends. While leverage could meet these needs near-term, undertaking debt to pay dividends is not a sustainable strategy. In the event the turnaround does not produce the desired results, additional leverage could exacerbate COH’s challenges.” Greenberger has a +3.6% average return on all stocks and a 56% success rate in making recommendations. She also has a +9.5% average return on Coach.

Coach Inc (NYSE:COH) currently has a top analyst consensus of HOLD.

To view all Coach recommendations, visit TipRanks today!

Carly Forster writes about stock market news. She can be reached at [email protected]


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