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Sterne Agee On Coach: Turnarounds Take Time


Ike Boruchow of Sterne Agee recently held a conference call with Coach Inc's (NYSE: COH) management team, including Andrea Resnick, Global Head of Investor Relations and Christina Colone, Director of Investor Relations.

Boruchow concluded in a note to clients on Wednesday that 2015 represents a “transition” year for Coach, “potentially” resulting in a healthier business over the long-term as the company works to “revive” its top and bottom-lines.

The analyst notes that the company will likely see “significant pressure” in the coming year as the company progresses on its turnaround initiatives and long-term business plans as a “strategic plan is in place, initiatives taking hold, but turnarounds take time.”

“Comps will likely remain sharply negative this year (guidance for a mid-to-high 20's decline), but management believes progress is being made since announcing their comprehensive strategy last summer,” Boruchow wrote. “Management emphasized that the transition is an iterative process, as they learn and react to each step.”

Boruchow adds that Coach's management remains confident that a successful turnaround has already begun and that a turnaround (if not several) are at some point “necessary to sustain their longevity.”

The company underwent a massive overhaul in the late 1990s and the CEO at the time Lew Frankfort brought in a new designer to expand into accessories and shift the business from a vertically integrated to an outsourced model.

“The transition took approximately four years, but the result was a full decade of strong growth,” Boruchow wrote.

Shares are Neutral rated with a $33 price target.

Latest Ratings for COH

Nov 2017SusquehannaInitiates Coverage OnPositive
Oct 2017BairdMaintainsOutperform
Oct 2017BuckinghamMaintainsBuy

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