QUOTE AND NEWS
Motley Fool  May 17  Comment 
Understanding the encouraging prospects for the two brands in their upcoming merger.
Motley Fool  May 15  Comment 
Investors on both sides of this acquisition seem happy, and the stocks have posted steady gains in the past week.
Motley Fool  May 15  Comment 
A look Coach's $2.4 billion acquisition -- plus a joint venture between the No.1 and 2 cable companies in the country.
Benzinga  May 13  Comment 
The luxury goods space saw a M&A announcement earlier this week. Coach Inc (NYSE: COH) announced a deal to buy Kate Spade & Co (NYSE: KATE) for $18.50 per share, or a total transaction value of $2.4 billion in cash. The deal is expected to...
Motley Fool  May 11  Comment 
The handbag makers came to a $2.4 billion merger agreement.
Benzinga  May 10  Comment 
Following Coach Inc (NYSE: COH)'s buyout of Kate Spade & Co (NYSE: KATE), the company is getting a positive feedback from the sell-side regarding its prospects in the $12 billion North American handbag market moving forward. Goldman Sachs...
Benzinga  May 10  Comment 
Following the $2.4 billion buyout of rival Kate Spade & Co (NYSE: KATE), Nomura on Tuesday reiterated its Buy rating on Coach Inc (NYSE: COH) and raised its price target from $45 to to $55. Analysts believe the deal will be accretive to Coach...
Motley Fool  May 9  Comment 
Coach and Kate Spade moved higher on their proposed pairing, but it's a deal that could benefit someone else even more.
Motley Fool  May 8  Comment 
The iconic handbag maker is having a good 2017 so far -- and management is confident that this deal will keep that growth going.
MarketWatch  May 8  Comment 
The U.S. stock market opened nearly flat on Monday following Emmanuel Macron's closely watched presidential election victory in France on Sunday. A run-up in global stocks leading up to the polls suggested that investors fully priced in Macron...




 

Coach Inc. (NYSE: COH) is a leading retailer of premium handbags and accessories, located primarily in North America and has recently expanded into Asian markets. Basing its image on "affordable luxury," Coach seeks to establish a premium brand that caters to affluent consumers but also provides lower-priced goods to appeal to the demand of middle-class customers.

Due to its effective merchandising and brand-building, Coach has boasted high operating margins and increasing popularity within the U.S. and Japan for years, even in the suffering American economy. COH also intends to take advantage of increasing luxury consumption in China by taking more control of its retail operations there and building its own stores instead of relying on third-party retailers. As COH continues to develop its ultra-luxury collections, it will share in the recent increase in spending in luxury good markets as the affluent release pent-up spending power from the last year. [1]

Business Overview

Coach is a leading American manufacturer and retailer of leather goods, accessories and apparel for men and women. Coach occupies the affordable luxury segment, which provides high-end merchandise for both high and middle-income consumers. For example, prices for a Coach handbag can range from $298 to $6,000.[2]


Business Segments

Coach is divided into three main revenue segments:

  • Handbags (63% of net sales): There are usually 3 - 4 collections per quarter and 4 - 7 styles per collection. These collections feature classic and fashion designs.
  • Accessories (28% of net sales): These include small leather goods, novelty accessories, and belts.
  • Other products (9% of net sales): These include footwear, business cases, jewelry, wearables, sunwear, travel bags, fragrance, and watches.[3]

Trends and Forces

Coach Seeks to Take Advantage of China's Growing Affluent Class

Coach has primarily stayed focused in North America and Japan. However, China is becoming an increasingly important market for luxury retailers. The rise of China's middle class has led to an increase in disposable income and thus an increase in potential customers. China spends more than $2 billion a year on luxury products.[4] What this means is that there is a growing affluent class in China that is capable of purchasing Coach products across all price points.

Luxury Image Essential for Sales

As with any luxury or affordable luxury retailer, Coach heavily relies on an image of exclusivity to fuel interest and sales of its products. A luxury company can lose its "luxury" status if the brand becomes too popular or too accessible. Coach thus takes a risk by having factory stores that sell discounted merchandise. None of Coach's competitors, such as Louis Vuitton and Gucci, have factory stores--they would be in direct opposition to the air of exclusivity the brands seek to cultivate. However, Coach protects its luxury status by placing its factory stores at least 60 miles away from its full-price locations.[5] In addition, the factory stores never sell the latest merchandise--they sell last year's or irregular pieces in addition to products that are manufactured specifically for the factory store. Coach never has sales at its full-price stores and does not allow retailers such as Macy's Inc. (M) to discount its merchandise. The result of these actions is that the factory stores and flagship locations serve two different demographics and are separate enough that the factory segment does not tarnish the overall image of the brand.[5]

Competition

Most of Coach's closest competitors are either privately owned or owned by larger European conglomerates of various luxury brands. Consequently, comparative data is unavailable. This includes Louis Vuitton and Fendi, both owned by LVMH Moet Hennessy L.V. (LVMUY), and Gucci Group.

Coach's business model is chiefly distinguished by its stress on "accessible luxury." This model thus reaches a larger demographic compared to many of Coach's higher-priced competitors, including Louis Vuitton, Gucci, and Prada. These competitors tend to focus on a higher income, high-fashion demographic. Companies like Dooney & Burke and Cole Haan also stress "accessible luxury" and are Coach's most successful competitors; however, Coach's market share has continued to increase in their presence.


References

  1. Luxury Spending Sees a Boost
  2. Coach website
  3. http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDE1NzM1fENoaWxkSUQ9NDI3ODU1fFR5cGU9MQ==&t=1
  4. Joseph Chaney. Handbag brand Coach plans major expansion in China..
  5. 5.0 5.1 Coach's Split Personality.
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