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Handbag stocks are still carrying too much baggage, analysts say

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Shares of handbag makers Coach and Michael Kors took a hit on Monday after analysts warned that slumping sales will probably continue.

[NEW YORK] Shares of handbag makers Coach and Michael Kors took a hit on Monday after analysts warned that slumping sales will probably continue.

JPMorgan Chase & Co downgraded Coach to a neutral rating from the equivalent of a buy, saying the brand's overhaul hasn't yet resonated with shoppers. Piper Jaffray Cos, meanwhile, lowered its earnings estimates and price target on Kors, citing a buildup of inventory at chains like Macy's and Dillard's.

The strong dollar has kept tourists from buying as much Kors merchandise in the US - a situation that will probably get worse before it gets better, JPMorgan said in its report. Sales of wristwatches also are sluggish, Piper Jaffray found.

"Watches remain under pressure in the US and are starting to slow in Europe," Erinn Murphy, a Piper Jaffray analyst, said in her report.

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Coach fell as much as four per cent to US$29.95 in New York, the biggest intraday decline since May 27. The stock was already down 17 per cent this year through the end of last week. Kors tumbled 7.3 per cent to US$38.92, which was also the worst performance since May 27. The shares have now lost almost half their value this year.

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