Credit Suisse Says 'Turnaround Still Long Way Off' For Coach

After Coach Inc’s COH big earnings beat this week, Credit Suisse analysts released a report updating their outlook for the stock. Although the positive earnings report was a good sign for the company in the short-term, analysts feel that Coach still has a long way to go to prove that the company is back on the right track.
North America not as weak as feared
North American comps were down 22 percent year-over-year for the quarter versus a consensus prediction of a 24.2 percent drop. Analysts believe that this large year-over year drop is hardly anything to get excited about, even if beating expectations is a modestly encouraging sign.
Asia disappoints
Analysts are concerned that Coach’s North American weakness may be spreading to Asia, as sales growth in the region declined from six percent to five percent for the quarter. Analysts expressed their fears about Asia, explaining, “With macro headwinds persisting in the region, we believe caution is in order as it appears unlikely that Asian countries will be able to provide enough growth to help offset North American declines as in the past.”
Improving margin trends
Analysts were encouraged by the company’s discipline in limiting promotions during the holiday season and maintaining a commitment to long-term brand health. Total gross margin fell by only 0.25 percent year-over-year versus expectations of a 1.0 percent decline.
Outlook
Analysts made upward adjustments to their earnings outlook for upcoming quarters based on Coach’s recently-released Q4 earnings numbers. Credit Suisse maintained a Neural rating on Coach, but raised its price target for the stock from $32 to $35.