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Cramer: Coach Is Now Out Of The 'Doghouse'

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Cramer: Coach Is Now Out Of The 'Doghouse'
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For many years, Coach Inc (NYSE: COH) has been stuck in the "doghouse" — but that is no longer the case, CNBC's Jim Cramer explained during his daily "Mad Money" show last Friday.

After several years of underperformance and a brand that has fallen out of touch with consumers, Coach hired a "genius" CEO Victor Luis who not only rejuvenated the Coach brand but delivered excellent numbers to investors, Cramer said. In fact, after taking over top ranks in 2014, it is "undeniable" that Coach is back.

Cramer has been bullish on Coach's turnaround prospects since September 2016 and has since gained more than 30 percent. But there is still further upside ahead as Coach is in the very early stages of Luis' "major overhaul of the business."

Specifically, Luis refined Coach's product line and gave the brand an image of being exclusive. The executive also decided to close poor performing stores, renovate strong stores and place an emphasis on shop managers at department stores.

Luis' game-plan is meant to tackle one of the biggest concerns among consumers who spend a lot of money on products.

"If you want to sell expensive handbags, you need people to believe that they're going to be exclusive, but Coach had lost what we call 'the aspirational touch," Cramer said.

Growth Story, Growing

But there is more to Coach's growth story: Luis' vision of building a "house of modern luxury lifestyle brands" through acquisitions of rival handbag and apparel maker Kate Spade & Co (NYSE: KATE) and luxury shoe brand Stuart Weitzman.

"Not only is the turnaround at Coach still very much on track, the company's taking the comeback that it made, the expertise, and applying it to Kate Spade, and I think that acquisition can fuel still another leg of this phenomenal welcome-back rally," Cramer concluded.

Bottom line, Cramer still loves Coach's stock, but under an ideal scenario investors should wait for a better entry point. In the meantime, investors are encouraged to buy a small position at current levels.

Related Links:

Deutsche Bank: With Kate Spade Acquisition, Coach Is A Triple Threat

Will Coach Become The Next Louis Vuitton?
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Image Credit: By Kristiane Cyrus (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Latest Ratings for COH

DateFirmActionFromTo
Aug 2017Morgan StanleyMaintainsUnderweight
Aug 2017NomuraMaintainsBuy
Aug 2017Credit SuisseMaintainsOutperform

View More Analyst Ratings for COH
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