More on Coach's poor holiday season sales tally


A shocking 13.6% drop in Coach's (COH) comparable store sales in North America is hard to reconcile with a luxury category that showed some resiliency during the period, note analysts.

The retailer gave almost no details on its outlook for 2014, but has a conference call scheduled for this morning at 8:30 a.m. EST (webcast) where it will be hard to avoid the topic.

COH -7.0% premarket

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Comments (2)
  • southfl
    , contributor
    Comments (78) | Send Message
     
    The problem with Coach in the US market is the decision of management to drive sales in the low end outlet channel. This decision has resulted in over 50% of the brand sales being derived from the outlet stores. In the consumer mind the prestige of the brand has been tarnished and the brand is no longer desirable. A 13% drop in sales is clear evidence the consumer is voting "NO" to the brand.

     

    The history of fashion brands demonstrates that once the brand loses its premium image by selling too much product in lower end distribution channels, the demise of the brand is rapid. Excessive off price promoting is another nail in the coffin of prestige brands.

     

    Past performance is irrelevant when the brand itself has lost its consumer appeal. Management has two choices. The first is to bite the bullet, purposefully downsize the outlet store business by at least 50% through store closures, and focus on rebuilding the brand image through product design and advertising in upscale channels of distribution. The short term impact on sales and profits will be ugly but they may be able to turn the business and ultimately have a strong, high margin business.

     

    The second option is to continue trying to drive sales across all channels of distribution and perhaps begin price promoting in department stores and mall based company stores. Once they begin price promoting the upper channel merchandise they will realize an initial surge in sales but long term will have to increase the frequency and depth of price promoting to sustain volume. This path ultimately leads to loss of premium distribution, destruction of brand perceived value, and death of the brand. For an example, look at Liz Claiborne which was a powerhouse department store brand in the 1980's and early 1990's. Today it is a private label brand at struggling JC Penney.
    22 Jan 2014, 08:35 AM Reply Like
  • chopchop0
    , contributor
    Comments (5066) | Send Message
     
    Good analysis.

     

    The TL:DR version is that COH selling cheap $50-100 purses in their outlets vs. sell purses that were several hundred $ years ago. I've seen this first hand with my spouse.

     

    Obviously selling things for cheaper and the least common denominator is probably not a good thing for the longevity of your "luxury" brand
    22 Jan 2014, 08:54 AM Reply Like
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