Michael Kors Store Closures Are Favorable For Coach: UBS

By Tonya Garcia Markets MarketWatch Pulse

Michael Kors Holdings Ltd.'s plan to close between 100 and 125 stores will benefit Coach Inc. , according to UBS. Analysts think the closures will impact North America most, where growth in the handbag market has decelerated. "Further, we believe Michael Kors store growth has been the number one competitive pressure for Coach over the past five years," the Wednesday note said. "[T]oday's announcement... reverses Coach's number one multi-year competitive headwind - and we believe Coach's brand is well-positioned as a share gainer as Michael Kors starts to pull back." There will also be benefits for the handbag sector as a whole. Coach has closed stores and plans to pull back distribution for Kate Spade & Co. , which it is acquiring. "The brands that make up almost 50% of the total market share in the $13 billion North America premium accessories category are now taking significant steps toward improving industry pricing/margins/returns," analysts wrote. Michael Kors shares are down 9.1% for the past three months, Coach shares are up 21.3% for the period, and Kate Spade is down 22.8% for the last three months. The S&P 500 index is up 2% for the past three months.

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