BlueFin Sees Nearly 16% Upside In Coach Shares

BlueFin’s Rebecca Duval believes Coach Inc (NYSE: COH) is taking bold steps to re-position its products. If these initiatives bear fruit, “it will go a long way to protect against any brand image erosion.”

Duval reiterated a Market Outperform rating on the company with a price target of $45.

Growth

“When we initiated research coverage on Coach we did so because of the growth opportunities and benefits of the product revamp and restructuring they were undertaking,” the analyst mentioned.

Since then, Coach has evolved in line with expectations, with the company introducing “new and exciting” assortments while launching a marketing campaign that targets millennials.

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According to the BlueFin report, “When you consider the strong customer response to the new handbags that has momentum at its back, along with operating efficiencies that the retailer has instituted such as store closures, corporate restructuring, store/wholesale remodels and a pullback on promotions, it makes for a very compelling story.”

New Initiatives

The company announced on August 9 it would no longer participate in the deep discount promotions in department stores.

Although department stores will continue to include Coach products in their deal days, the company will no longer guarantee margin allowance to support such frequent sales.

Coach also announced the closure of 25 percent of its wholesale doors.

“These are bold moves for any retailer and one which we think reflects management’s confidence that they have adequately repositioned the product line to be more of an aspirational brand,” Duval stated.

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