Credit Suisse: Coach's Turnaround Seen In 2016

Coach Inc (NYSE: COH) remains a long ride from its hoped-for turn-around, an analyst said Monday.

The New York-based high-end handbag maker opened Monday near a 52-week low in the wake of a disappointing outlook that forecast a continued steep decline in same-store sales. Shares traded recently down 1 percent.

Coach is in the midst of a restructuring that will close 20 percent of its North American stores. Its Chairman Lew Frankfort said recently he will retire in November after being succeeded earlier this year as chief executive by Victor Luis.

Comparable sales fell 24 percent in the recent fiscal first quarter, and although Credit Suisse's Christian Buss thinks the measure may be hitting bottom, "they're still a long way off" from turning positive.

Earnings will be depressed until the second half of 2016, according to Buss, when he sees same-store sales turning positive.

Buss maintains a Neutral rating on the stock and $34 target. Lower costs and low expectations helped the company deliver quarterly earnings Wednesday of $0.53 per share versus the consensus $0.43 per share. Still, that's about a 60 percent decline from a year earlier.

Gross margins in the recent period continued to narrow, while international growth slowed, Buss said.

While the recent earnings beat "may have highlighted some near-term stability, it's possible a true turn-around may never materialize," Deutsche Bank's David Weiner said in a note maintaining a Hold and $37 target.

Improvements "will be both difficult and take a long time," Weiner said.