Prada Handbags

Coach (NYSE:COH) is a leading American marketer of luxury lifestyle handbags and other fashion accessories for both men and women. The firm competes with other premium apparel and accessories players like Polo Ralph Lauren (NYSE:RL), Liz Claiborne (NYSE:LIZ), and AnnTaylor (NYSE:ANN), as well as high-end brands like Louis Vuitton, Hermes, Gucci and Prada.

The handbags division is the most valuable segment for Coach contributing more than 50% to the stock value. However, Coach’s handbags profit margin has been declining consistently from a historical high of above 40% in 2007. The decrease was a result of a combination of factors: promotional activities and price reduction to induce consumer spending during the recession, higher expenses from Coach-operated stores in North America, Japan and China, and a declining proportion of department stores & other retailers in Coach’s total handbags revenues.

We believe the above factors will continue to affect Coach’s sales in the coming years. While we anticipate Coach’s handbags EBITDA margin will decline to 32% by the end of Trefis forecast period, Trefis members expect a smaller decline in the margin, reaching 34%. The member estimates imply an upside of 4% to our price estimate for COH stock.

We currently have a Trefis price estimate of $57.04 for Coach’s stock, ahead of the market price of around $53.