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Cramer: The Luxe Life for Cheap

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Who doesn't love to buy something top of the line at a sharp discount?

It's almost irresistible.

That's how Jim Cramer feels about Coach the maker of luxury accessories and apparel. At current levels, he thinks buyers are getting quality at a price that can't be beat.

"I know that Coach has been a real dog lately, but I think it could be approaching one of those 'every dog has its day' moments," Cramer said.

Coach has drifted about 30 points from its high with a substantial part of the weakness due to disappointing quarters, including the most recent miss in January which showed Coach's same store sales declined by 2%.

"However, what we've seen in this long decline, one that's taken Coach from $79 to slightly below $50, is a stock that has made the transition from growth to value," Cramer said.

And that value stems from vast changes Coach has made internally. For example:
- Coach has launched a new sales strategy with greater focus on youthful selections and men.
- Coach is rolling out new footwear product line.
- The board is replacing long-time Coach CEO Lew Frankfort, with Victor Luis, the President of Coach's International Group. "He's led the company's expansion into Asia which is now a huge growth driver for the company," said Cramer. (Frankfort will remain as executive Chairman.)
- Coach is growing in China. "Right now Coach gets 28% of its revenues from outside of the United States, and they've got a rapidly growing Chinese business," Cramer explained.


Bojan Fatur | E+ | Getty Images

Also Cramer said Coach had a lot of positive financial metrics. It has industry leading margins. It generates a massive amount of cash flow. The company has bought back $2.5 billion worth of stock and it yields 2.4%.

With all those powerful catalysts coming together Cramer believes that Coach today is kind of like Gap about 2 years ago – right before is turn.

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"What we've seen in retail, is that when these companies stumble, they ultimately bottom at a certain point and then start to rebound," Cramer explained.

"In the case of Gap, it tumbled for years, ultimately bottoming when it hit $15.52 in August of 2011. Gap bounced along the bottom for a little while, but then the company turned things around and Wall Street caught on. Since then it has rocketed higher."

And he thinks the same could be true for Coach.

"At current levels, I'm a buyer," said Cramer. "Down here, Coach sells for just 12 times earnings, considerably cheaper than the average stock in the S&P 500. The value is for real."

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