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Will Coach Ever Come Back To Its Previous Dominance Position?

|Includes: KORS, SBUX, Tapestry, Inc. (TPR)

Coach, Inc. (COH) has dominated the affordable luxury bag market for more than 10 years, until recently its momentum got taken by upstarts like Michael Kors, esp. in the US market. I recall a few years ago, amid the US financial crisis, specifically in June 2008, Starbucks (NASDAQ:SBUX) the coffee company has experienced a similar situation, at least in terms of the stock price, it went to about $7 to $8 range. The company came back now, the stock is worth about $70. Is there any similarities in those two companies or situations? Is there any good chance for Coach to come back?

Personally I think the situation was a bit different. In the case of SBUX, the main problem was they expanded too fast, growth without profitability, and hit a perfect storm with financial crisis. They had some competitors such as McDonald, Panrea Bread (NASDAQ:PNRA), Donkin Donuts, etc. But no direct or strong competitor. Peet's coffee is much smaller. Their problem (growing too fast) was mostly self inflicted, and since Schultz came back, he righted the ship and the size, now everything is working the way it supposed to work.

In the case of Coach, it's both their own mistake (too much discount, value conscious in outlet stores), plus the upstart competitors (MK is the strongest one). Can those be fixed? I guess it's possible, but not easy. Thus the recent investor conference, they laid out their plan: pretty much "throwing out kitchen sink" plan. It will work if they can achieve the new "modern luxury" as they promised, at the same time stabilize the US sales, and keep the China growth going. All are not trivial. For the investors, expect some bumps on the ride, it won't be a smooth ride, even if eventually they come back.

PS, just saw Coach and Michael Kors China websites. Coach is much better than Kors. This is not a fair comparison, as Kors even does not have a Chinese name. Btw the Chinese name for Coach is蔻驰.

Disclosure: The author is long COH.