Barclays Says Coach Now Worth $50/Share; Firm Less Optimistic On Michael Kors

In a report published Thursday, Barclays analysts said that investor focus has recently turning to global brands, some of which are in the process of transformation or elevation. "Domestic trends will likely be at the forefront of driving shares and viewed as an indicator of progress," the report added. The analysts upgraded the rating for Coach Inc COH from Equal-Weight to Overweight, while raising the price target from $38 to $50. "With turnaround efforts well underway, we are growing more confident in the prospect of domestic store comp acceleration," the analysts said. They estimate store productivity levels to reach $1,038 by end of FY15, versus the peak of $1,700+. Store productivity levels have not been this low since FY03. Actions being taken by Coach to transform include store reformats and closures, new design, and updates to pricing architecture. "Additionally, we expect that competitive pressures are easing to some extent," Barclays stated. The EPS estimates for FY15 and FY16 have been raised from $1.85 to $1.98 and from $2.05 to $2.25, respectively. The analysts maintained an Equal-Weight rating for Michael Kors Holdings Ltd KORS, while reducing the price target from $70 to $60, saying that the company may "soon be in need of transformation." Domestic wholesale doors declined sequentially for the first time last quarter. "We see a downsizing or reset of this business, which is over-distributed vs. peers, as a risk going forward, and expect domestic retail comps could turn negative in the next year," the report mentioned. The EPS estimate for FY16 has been reduced from $4.75 to $4.60.