QUOTE AND NEWS
SeekingAlpha  Sep 3  Comment 
By IVI Guy: Coach (NYSE: COH) shares are down 36% since the beginning of the year. Disappointing sales, earnings misses and weakness in the North American market contributed to the decline. The selling climaxed with Coach's investor day...
SeekingAlpha  Aug 28  Comment 
By Ryan Gaylor: While the broader market is partying like it's 1999, there are stocks acting more like it is March 2009. Coach (NYSE:COH) is one of these names. Investor sentiment is about as negative as it can get for a stock. Of the more than 30...
SeekingAlpha  Aug 27  Comment 
By Nelson Alves: I first wrote a Coach Inc. (NYSE:COH) overall review here. At the time, I classified the company as a long-term buy, especially because of the pronounced stock price decline. However, seeing the volatility on the stock, I think we...
SeekingAlpha  Aug 24  Comment 
By Balanced Investing: Coach, Inc.'s (NYSE:COH), a leading New York design house of modern luxury accessories and lifestyle collections, has recently reported its financial results for the fiscal year 2014. The company's stock price has been...
SeekingAlpha  Aug 22  Comment 
By Alex Pitti: When most investors look at Michael Kors (NYSE:KORS) stock they probably see a growth brand that is currently doing fantastically, but may fall out of favor with consumers at any point. It is rational to feel this way when looking...
SeekingAlpha  Aug 20  Comment 
By Marshall Hargrave: Shares of the high-end accessory retailer Kate Spade (NYSE:KATE) cratered after posting earnings earlier this month. This isn't a huge surprise given the Michael Kors (NYSE:KORS) weakness; due to quarterly results, the shares...
Market Intelligence Center  Aug 19  Comment 
The patented options-trade picking algorithms used by MarketIntelligenceCenter.com found a trading opportunity with Coach Inc. (COH) that should provide a 5.70% return in just 95 days. Sell one Nov. '14 call at the $36.00 level for each 100 shares...
Market Intelligence Center  Aug 18  Comment 
Coach Inc. (COH) is an excellent choice for either a diagonal spread or a covered call expiring in Nov. '14 at the $36.00 level according to MarketIntelligenceCenter.com’s patented algorithms.A covered call on Coach for a net debit of about...
SeekingAlpha  Aug 17  Comment 
By Apex Financial Consultants: With its fourth quarter earnings result, Coach Inc.'s (NYSE:COH) fiscal year 2014 comes to an end. In this fiscal year the company's stock price dropped more than 33%. Though the company beat analysts' estimates it...
SeekingAlpha  Aug 15  Comment 
By Gemstone Equity Research: Coach, Inc. (NYSE:COH), a company who used to be one of the leading fashion accessories brands in the world, has been going through hard times since 2012. During the last couple of years this American manufacturer of...




 

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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