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Market trusts Coach to surpass Kate Spade and Michael Kors this time

By Angela Gonzalez-Rodriguez


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Business |ANALYSIS

Market analysts are in agreement: this time, Coach will surge as the winner of the American affordable luxury triumvirate. It wasn't long ago when Coach came third after Kate Spade and Michael Kors yet now, many analysts at Wall Street trust Coach Inc. to be capable of making quite a comeback.

"Coach is the best-positioned company in the 'affordable luxury' accessory group," said Credit Suisse analyst Christian Buss, who upgraded the company's shares to "outperform" from "neutral" last week.

"We believe stabilisation in Coach's core business, combined with a possible acquisition narrative could help drive significant, sustained earnings power long term," added Buss.

Coach is expected to deliver strong Q4 comps and surpass Michael Kors

Coach's North America division is expected to report its first quarterly comparable-sales gain in three years, highlights CNBC. Shares at the retailer have received two upgrades recently, with UBS leading the wave of positivism coming from Wall Street.

On the back of recent Wall Street´s optimism, Coach´s stock has gained almost 35 percent over the past year, despite a 4 percent slid toward 41 dollars in trading Tuesday, reported CNBC News.

Coach's transformation reached cruise speed in January, when it said sales grew for the first time in more than two years. Back then, analysts remained sceptical about a real turnaround, explaining that gain with the acquisition of the Stuart Weitzman footwear brand. Now, however, the market is optimistic and confides Coach´s rebound to be sustainable.

In comparison, Kate Spade presented top line growth of 9.1 percent year-over-year in fiscal 2015, as compared to a 7.7 percent YoY increase for Michael Kors (KORS) in its last reported fiscal quarter.

Wall Street expects Coach to post 16 percent quarterly revenue increase

Wall Street expects Coach to post a 16 percent increase in revenue, to 1.17 billion dollars, when it reports earnings next week, according to a consensus estimate from Thomson Reuters. Analysts predict earnings per share will rise 31 percent, to 41 cents a share.

Meanwhile, UBS sees Coach beating the consensus EPS estimate by a penny next week when the company reports its fourth-quarter’s earnings. Looking ahead, UBS predicts Coach will gain market share and achieve a "strong" full price selling rate, reports ‘Seeking Alpha’. "We saw significant levels of KORS/KATE during our recent TJX/ROST store tours…but no Coach," advances analyst Michael Binetti. UBS currently holds a ‘buy’ rating and 48 dollars price target on Coach.

Image:Coach Web

Kate Spade
Michael Kors