Will Handbag Companies Be Hurt This Holiday Season?
In a report published Tuesday, Cowen and Co analyst Oliver Chen said that the existing challenges in the Handbag sector may continue into the Holiday Season. The sector could continue to witness promo competition in US departmental stores, shift to CE spending, rise of athleisure and lack of inspiring handbag newness.
Analyst Oliver Chen maintained an Outperform rating on Kate Spade & Co (NYSE: KATE), while reducing the price target from $37 to $30.
In the report Cowen and Co noted, "While we're encouraged with KATE's positive lean towards handbags & SLG, our optimism is largely driven by the extensive lifestyle nature of the brand. We view KATE's wide array of categories across multiple consumer sub-sectors (bridal, office, shoes bags, RTW, home) as a competitive advantage…Further, we like KATE's tight control of its distribution channels."
Chen views Kate Spade as well positioned and "best prepared" to "weather the tougher industry backdrop."
Cowen and Co reiterated an Outperform rating on Michael Kors Holdings Ltd (NYSE: KORS), while reducing the price target from $56 to $51.
Chen believes that Michael Kors' FY16 guidance is achievable, although the company's near-to-medium term performance is likely to be impacted by the decelerating handbag sector momentum. "We like KORS' inexpensive valuation (~9-10x vs. sector avg. ~17x) and maintain confidence in KORS' brand longevity, product acceptance across non-handbag categories, global opportunity, digital, and solid CF (yield ~5.3%), plus we like $1.0bn (~11% of market cap) remaining on KORS' share buyback program," Chen explained.
Chen maintained a Market Perform rating on Coach Inc (NYSE: COH), while reducing the price target from $43 to $40.
"We're encouraged by COH's brand metrics gaining health during 3Q on sequential improvement in brick & mortar comps (-12% in 3Q vs. -16% in 2Q), tight margin control, and clean inventories," Chen said, while adding that the "road to positive comps may be bumpy."
Latest Ratings for KORS
|Oct 2016||OTR GLobal||Upgrades||Negative||Mixed|
|Sep 2016||Guggenheim||Initiates Coverage on||Neutral|
|Sep 2016||CLSA||Initiates Coverage on||Sell|
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