Coach Has This Turnaround In The Bag; Analyst Predicts Stock To Outperform

Coach Inc COH has pulled off a three-year turnaround and now turns its attention to integrating its Kate Spade acquisition, prompting one analyst to predict double-digit earnings growth with a compound annual growth rate of 10 percent over the next five years.

Bernstein analyst Jamie Merriman rated Coach at Outperform and set a price target of $51. It was up 1.18 percent at $41.28 at last check.

Kate Spade Looking Good

“We believe the repositioning of Coach has been successful and will continue to drive positive comps,” Merriman wrote. “There is clear opportunity to grow the Kate Spade brand, as well as drive synergies and deliver faster sales and earnings growth for the group.”

“After a pullback in the stock at year end results, we believe investors now have another opportunity at the story, as we see room for multiple expansion as the Kate integration proceeds,” Merriman added.

Under Victor Luis, who became CEO in 2014, Coach’s restructuring included closing the bottom performing 70 stores, a reinvestment in the band’s presence in department stores and a reduction in discounting. Handbags priced higher than $400 a pop, for example, jumped from 16 percent of sales in 2013 to 45 percent this year.

Related Link: Coach’s Turnaround: Is There Room In This Bag For More Upside? ________ Image Credit: By Shoshanah (My new Coach Bag!) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons