OUT OF THE VALLEY

Coach: From discount staple to status symbol, in one chart

Obsession
Fashion
Obsession
Fashion

Same-store sales are a nice, simple indicator of a business’ health. They filter out noise from store openings and new retail channels, and zoom in on whether stores that have been around a year or more are seeing sales rise or fall.

That’s why Coach is so excited about its same-store sales right now.

For the first time since late 2013, those numbers are in positive territory for the American handbag maker and fashion brand. On a conference call with investors today (Aug. 9), CEO Victor Luis noted that Coach’s 2% increase in same-store sales for the fourth quarter marks a 26% upswing since the start of 2015.

The turnaround has taken years. Coach has had to dispel the image that it’s a label that’s always on sale. It hired fashion veteran Stuart Vevers as its creative director, launched a runway collection called Coach 1941, and perhaps most importantly stopped those ubiquitous discounts.

Coach 1941 is growing into a respected fashion line, sold at Coach’s retail outlets and trendy, high-end specialty shops around the world. It turns up in fashion editorials now, and men as well as women are buying it. Luis said on the call that the customer for the brand includes two important groups: lapsed Coach customers who had been looking elsewhere; and a younger generation of fashion-forward shoppers, many of whom are shopping on Coach.com.

At the same time, Coach has reduced its reliance on department stores. The company announced today that it’s pulling out of about 250 department stores, or about 25% of its department-store distribution, around the US. While Luis said the brand still believes the department store is critical to Coach’s wholesale strategy, the constant discounts were hurting the brand image. Coach also toned down discounts it offers in its own retail stores, a move it plans to stick to in the year ahead. Pricier bags in the above-$400 bracket now make up about 40% of handbag sales, up from around 30% last year.

The brand even plans to launch a women’s fragrance this fall, providing an important entry point for customers, silly commercials and all.

Luis said he was optimistic about the handbag category, and “the prospects that exist for the world’s middle classes.” Chinese shoppers have evidently taken a liking to Coach, and as its middle class mushrooms, that’s more good news.

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