Accessories on the Rise
Coach (NYSE: COH) increased 5% recently after being raised to a buy rating by a Canaccord Genuity analyst. The analyst stated that the recent drop in the upscale handbag and accessories maker’s shares makes it an attractive investment. Analyst Laura Champine noted that the company’s shares have fallen about 10% so far this year, while shares of similar luxury retailers have risen. Coach has a 28% share in the U.S. handbag market, 17% in Japan, and 6% in China. The company’s shares are currently trading at about 25% of other luxury retailers, where they have historically traded at about 15% below. According to Champine: “We do not believe this discount is justified, given that Coach boasts industry-leading margins and returns.” Coach does have a good track record. The company has beaten Wall Street estimates in 85% of all quarters for the past five years. However, in the most recent quarter, sales missed analysts’ projections in addition to the company’s own projections. The company is facing rising competition from companies such as Michael Kors (NYSE: KORS) that are finding their way into the handbag category Coach previously dominated.