No Excess Baggage Seen at Coach (COH); Buy While Prices Are Low - Cramer

March 15, 2013 11:24 AM EDT
Coach (NYSE: COH) is higher on the session Friday following a positive mention by stock sage Jim Cramer on Thursday night's "Mad Money."

Cramer noted that now is a great time to "take a chance" on Coach, which has transitioned from growth to value and sits just a few points above annual lows. Shares are going for about 12 times expectated earnings with a dividend yield of about 2.4 percent.

In the dog-eat-dog fashion industry, transitioning from a hot-growth play to a company with more subdued growth prospects isn't easy, but it does happen. Examples might include names like Gap (NYSE: GPS) and Ann, Inc. (NYSE: ANN). Cramer sees the same in Coach; the company is hitting a bottom and will be able to recover if it just executes on its plan.

Coach diluted its brand with the opening of too many outlet locations, which accounted for about one-third of the Company's revenue in its latest quarter. Cramer notes that the company is working to reverse that pattern by introducing a new, higher-margin bag line as well as aiming to make Coach more of a lifestyle brand. The company is also stepping up efforts in China, which accounted for about 11 percent of revs last quarter.

The strategy isn't new and does work. One recent example is Michael Kors, which saw its stock nearly double in 2012.

Shares of Coach are up 0.8 percent Friday. The stock is about 10 percent above its 52-week low of $45.87, but 58 percent below its 52-week high of $79.70.

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