Can Coach Turn Things Around?

Coach (COH) continues to go to heck in a handbag today with the stock hitting its lowest price since 2009 amid a raft of analyst downgrades.

At $34.71 Coach shares fell 2.75% intraday after dropping as much as 3.8% to $34.31.

The luxury handbag retailer told analysts at a meeting Thursday to expect a double-digit drop in revenue for the fiscal year ending June, and continued loss of market share.

The company isn’t just sitting on its hands. Coach plans to close 70 of its stores and update others as part of a new branding strategy which Coach said is “centered on the concept of defining modern luxury.” These measures are to include the near elimination of its factory outlet stores and reduced promotional pricing for its products.

The question now: Is a turnaround possible?

Morgan Stanley’s Kimberly C. Greenberger maintained an Underweight rating but cut her target to $29, calling Coach "a fading brand" and warning that "re-positioning will take years to play out." She wrote:

COH is taking steps to stabilize brand damage, we estimate heavy turnaround costs and HQ investments burn FY15 cash. We cut our PT to $29 (15x $1.90 FY15 EPSe) and see further downside despite today’s 9% drop.

Citigroup's Oliver Chen maintained his Neutral rating but reduced his target to $36. He writes:

We like new product which fills missing key voids in bag silhouettes, has improved texture, weight and presentation of leather, evokes the Coach Code with more thrill, & has an improved merchandising/flow strategy which is more customer-centric core/downtown/uptown. But the COH system reboot is a layer cake of risk given complexity of integration of new product, stores, brand elevation, & multi-channel execution.

Others downgrading or cutting targets included William Blair, which downgraded to Market Perform from Outperform; Goldman Sachs cut its target to $30; Barclays and Canaccord cut their targets to $35;. BMO downgraded to Market Perform from Outperform.

Some bulls remains, but not many. Stifel Nicolaus maintains a Buy on Coach, although it cut its target to $47 per share from $65. Nomura kept its Buy rating but cut its target cut to $45 from $50.