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UPDATE: Credit Suisse Reiterates On Coach On Mixed Factors

Dwight Einhorn

In a report published Thursday, Credit Suisse analyst Christian Buss reiterated a Neutral rating on Coach (NYSE: COH), but lowered the price target from $39.00 to $30.00.

In the report, Credit Suisse noted, “We now believe that Coach is on the right track following introduction of its brand transformation initiative, but remain concerned with respect to shares, given our view that earnings power will be delayed into late FY16 at the earliest.

"We are impressed by Coach's plans to: 1) close 70 underperforming stores; 2) roll out a new store design concept and devote more resources to flagships; 3) create brand presence in department stores; 4) focus and intensify its marketing message; 5) reduce flash sale events (to 3 per month from 3 per week); and 6) improve product and seasonal flow in the outlet channel.

"We view these initiatives as necessary for long-term brand survival among increasing competition but expect returns to be delayed in late FY16, suggesting a multiple discount relative to peers remains in order. We reiterate our Neutral rating, lower our FY15 EPS estimate to $2.05 from $2.84, and our TP to $30 from $39.”

Coach closed on Wednesday at $35.06.

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