Analyst Downgrades Coach Rating

NEW YORK, United States — A Canaccord Genuity analyst is lowering her rating and price target for Coach, saying slowing traffic and tough competition from Michael Kors could weigh on the handbag and accessories company.

The stock fell in premarket trading Monday.

The analyst Laura Champine lowered her rating on Coach Inc. to "Hold" from "Buy" and reduced its price target to $62 from $65.

In a client note, the analyst said that she anticipates the chain will see a 6 percent drop in its third-quarter sales at U.S. stores open at least a year as it contends with softening traffic. Champine said that these sales comprise 70 percent of the company's total sales. The figure is also a key gauge of a retailer's health because it excludes results from stores recently opened or closed.

Champine also predicts that rival Michael Kors Holdings Ltd. will continue to gain ground on Coach Inc. In August Michael Kors posted strong first-quarter results and raised its full-year earnings and revenue outlooks.

In addition, Champine is concerned about executive departures at Coach. Longtime CEO Lew Franfort has announced that he will step aside next year. And the company recently saw the exits of Mike Tucci, president of the North American Group, and Jerry Stritzke, president and chief operating officer. Champine said that the executives are taking a wealth of experience with them. She's also wondering if Victor Luis, who will become CEO in January, is the best fit for the post. Champine said that Luis "comes mostly with international experience, while Coach generates only 30 percent of total sales outside the U.S."

A representative for Coach did not immediately respond to an email seeking comment.

Coach's shares declined 39 cents to $54.20 before the market open. They are up 18 percent from a 52-week low of $45.87 in late February.

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