Coach: Rich Opportunities for Shareholders
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Ladies and gentlemen of distinguished taste and plentiful wallet: Coach (NYSE: COH) is back to woo you.
Beginning August 1, Coach stores and wholesalers will carry the new Legacy Collection, a complete lifestyle collection for men and women that includes handbags, small leather goods, shoes, accessories, and jewelry. The Legacy Collection draws inspiration from classic pieces from the brand’s history and comes in at a much higher price point; bags are rumored to range from $348 to well over $1,000. By way of comparison, a small bag from the entry-level affordable luxury Poppy line from Coach currently starts around $128 dollars.
As Alexandria Steigrad points out in her article on WWD.com, after the economic downturn began, Coach cut its prices so around half of the bags offered were priced below $300. Prior to 2008 the bags were not only pricier for consumers, but were also pricier to produce, more often constructed from leather and more expensive hardware.
Coach did a great job sailing through the past few years becoming more efficient in production and sales, but alienated a core group of customers. The current Coach offerings skew younger, trendier, and frankly, cheaper.
Coach’s chairman and CEO, Lew Frankfort told Steigrad that only 35% of consumers are really watching their spending. The other 65% are “much more willing to spend more than they contemplated if indeed a bag catches their attention.” Of course they are - there are always people looking to spend money on timeless, classic products. One of Coach's higher-end competitors, Louis Vuitton (NASDAQOTH: LVMUY), has been producing the same styles of trunks and bags since the brand was established over 150 years ago. The classics are the ones that are sought-after and passed down for generations. A novelty bag doesn't have much life past one season, leading to lagging sales and interest.
Accessories are still the hot-spot for a recession-minded fashionista with money to spend. It’s much easier to justify spending upwards of $1,000 on a quality leather bag that a woman could hand down to her children and grandchildren as opposed to a trendy top or dress. Accessories bring an otherwise outdated wardrobe into a new season with much less of a financial investment.
As long as Coach is able to bring these loyal shoppers without a home back into the fold, they should be able to reap major benefits: namely, increased sales. And that could mean Coach shares are a bargain for investors today.
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