Coach Shares Edge Lower As Credit Suisse Warns Of A Concern

In a report published Friday, Credit Suisse analyst Christian Buss maintained a Neutral rating on

, while reducing the price target from $36 to $33, after the company increased the discounts on its semi-annual online sale. Analyst Christian Buss pointed out that there was a sharp increase in the number of handbag styles on sale as well as in the discount rate during the semi-annual sale on Coach's website. The company had adopted the semi-annual sales format in 2014 while aiming to keep 25 percent of its assortment on sale for an average discount of 30 percent to 50 percent. "In our June check 38% of styles were on sale at an average discount rate of 50%. This is an acceleration from the last semi -annual sale check in December where 15% of styles were on sale at an average discount of 33%," Buss wrote. In the report Credit Suisse noted, "We are increasingly concerned that a rise in discounting of the core business could indicate that new styles are not taking hold with consumers." Buss pointed out that Coach had retained its position of the second most discounted brand in mid-tier department stores and as the "most discounted brand" in premium department stores, with the percent of styles on sales increasing by 10 percentage points in both the channels. The EPS estimates for FY15 and FY16 have been reduced from $1.94 to $1.93 and from $1.97 to $1.78, respectively.