NEW YORK ( TheStreet) -- Coach (COH) , a luxury-goods maker and retailer best known for its handbags, is trying to spark its sales, profit and stock price by expanding more into clothing and aiming for more upscale customers.
Investors may want to consider the shares while they are down.
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The stock has lost 35.7% so far this year through Monday's close, compared with a gain of 11.1% for the Standard & Poor's 500 Index. The shares trade at 14.7 times estimated earnings for Coach's current fiscal year, which ends in June. The S&P 500 trades at 17.3 times estimated earnings and rival Michael Kors (KORS) 19.3 times.
Coach's dividend yield stands at 3.6%, compared with 1.9% for companies in the S&P 500. Kors doesn't pay a dividend.
As it increases its offerings of apparel and shoes, Coach is introducing clothes designed by Stewart Verver, its creative director whom it hired last year. His spring 2015 collection received favorable press from trade publication Fashionista.
Meanwhile, Coach is going upscale, partly by decreasing its discounts. It has reduced flash sales to three per month from three per week. It also plans to close 70 underperforming stores, roll out a new store design concept, devote more resources to its flagship stores and boost its presence in department stores. The company is also opening luxury retail stories in Beverly Hills, Calif.; New York; and Tokyo.
The results won't be instant. Sales fell 10% in its fiscal first quarter, which ended on Sept. 27. But if investors believe Coach's turnaround will succeed, the time to buy the stock is now while it is still relatively cheap.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates COACH INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate COACH INC (COH) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow."
You can view the full analysis from the report here: COH Ratings Report