Parent Company of Coach and Kate Spade Falls on UBS Downgrade

Tapestry Inc., the parent company of designer brands Coach and Kate Spade, saw its shares heading lower on Monday after a downgrade from a UBS analyst.

UBS has downgraded the stock from “buy” to “neutral” and has cited concerns that the resale market will exert pressure on the company’s brands, particularly Coach and Kate Spade.

“Consumers increasingly have the option to purchase a new Coach bag for $400 or a used European luxury brand item for the same price,” analysts led by Jay Sole wrote.

“We think many shoppers are opting for the latter choice.”

According to the analysts, Coach is lowering its prices, with average selling price (ASP) for the brand’s handbags falling 5% in September.

Given ‘resale’ may already account for $24 billion in revenue and is expected to double in just five years, we think the falling ASP trend could continue for many quarters,” the analysts wrote.

According to the firm, the turnaround at the Kate Spade brand will also take years.

Shares dropped nearly 3% on the downgrade and have fallen around 44% over the last year.

Disclaimer: We have no position in Tapestry Inc. (NYSE: TPR) and have not been compensated for this article.