"Outlets certainly enlarge distribution opportunity; however, we believe increasing discount products in the marketplace may not be congruent with the effort to restore brand equity," she said.
Coach's woes have been further dented by the growing popularity of brands such as Michael Kors and Kate Spade, which offer products at a similar price point, but are regarded as more on-trend.
Michael Kors on Tuesday said that same-store sales grew 28 percent in the third quarter of fiscal 2014. The feat was even more impressive given nearly every other retailer was forced to slash prices to capture market share during the competitive holiday season. Particularly troublesome to Coach was the Kors management's bullish tone on men's, which has been one of the relatively strong areas for Coach, Wells Fargo analyst Paul Lejuez said.
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"Kors clearly took share this holiday season and did not have to do so at the expense of margin," he said.
Kors shares hit a 52-week high of $93.18 on Tuesday following its report. Coach stock is trading below $45, a decline of 38 percent from two years ago.
Becoming more than just handbags
Under new CEO Victor Luis, who took over the role from 35-year veteran Lew Frankfort in January, Coach is evolving into a "lifestyle" brand—meaning it will expand its offerings from handbags and leather goods into categories such as clothing, accessories and footwear.
Its fashion show will particularly help Coach's marketing efforts during this transition, by educating consumers that Coach now offers products from head to toe, Chen said. It will also highlight the brand's new creative director, Stuart Vevers, whose experience at British fashion house Mulberry and LVMH-owned Loewe will up its fashion resume.
Following its most recent earnings report, exiting CEO Frankfurt said, "Stuart has been absolutely true to our underlying brand equities. The product is rich, it's elevated, it's original."
Vevers' product should also help boost average unit retail (AUR) prices at the label, which, in spite of its factory offerings, saw AUR rise 7 percent last year, led by growth in its above $400 and $600 price buckets.
Despite the potential upside to come from Coach's new offerings, Morgan Stanley's Greenberger remains equal weight on the company, saying that the positive steps it's taking could take several years to yield results. Wells Fargo's Lejuez, who has a 12-month price target between $44 and $48 on the brand, sounded a similar note.
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"In our view, Coach's problems aren't about correcting a fashion miss, but rather fixing the brand image over time," he said.
Chen, who has a buy rating and a $56 price target on the stock, was more bullish, and pointed out how quickly things have changed since Vevers arrived. He pointed out that the creative director was only named to his new role in June, and the brand has already made moves to up its cachet.
"It's a brand a lot of people like around the United States—they just need more reasons to buy it," he said.
—By CNBC's Krystina Gustafson. Follow her on Twitter