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Coach posts increase in sales, reflecting turnaround plan

January 31, 2017

Coach, on a path to shed its past as a brand marred by markdowns, is seeing progress.

On Tuesday, Coach, Inc. which also owns Stuart Weitzman, reported an increase in gross revenue of 5 percent year-over-year in the second quarter of 2017, to $906 million. Coach’s gross revenue was up 4 percent, to $830 million.

The quarter marks the third consecutive sales climb for the Coach brand, which saw annual revenue slip by 19 percent in 2014 to $408 million. CEO Victor Luis credits Coach’s restructuring strategy, now two years in the making, for the turnaround — it centers around improving in-store experiences while pulling back on wholesale, elevating product to include more leather goods at higher price points and increasing awareness through a global influencer campaign that included a holiday video and Instagram campaign starring actresses Chloe Grace Moretz, Millie Bobbie Brown and Winona Ryder, as well as social media stars Riley Keough and Lexi Boling.

“We’re focused on highlighting our fashion legacy and positioning as a luxury brand for leather crafted goods,” said Luis in an earnings call on Tuesday. “As a result of our efforts in improving customer touch points, we’re seeing progress.” He added that, through surveys, customers reported viewing the brand as less reliant on discounts.

Coach has been making a concentrated effort to pull products from department stores that have continuously marked down its products. In North America, Luis said that in the second quarter, Coach slashed its wholesale partners by 25 percent, or by 250 stores. The number of days products were on sale decreased by 40 percent. Andre Cohen, Coach’s president of North America and global marketing, directly linked Coach’s lift in sales to its department store pullback, saying that Coach had a “clear strategic direction to limit promotional stance in order to promote long term brand health.”

“They’re finally going in the right direction,” said Jessica Ramirez, retail research analyst at Jane Hali & Associates. “Pulling out of department stores will continue to be a big strategy to control inventory. It’s a key movement, helping them to not be such a promotional brand and getting customers to think about them without having to mark down.”

Internally, Coach has limited its own promotional strategies: Cohen said that its Black Friday sale remained at one fixed price cut and excluded its Coach 1941 collection, which it introduced in 2016 as part of its 75th anniversary celebrations. The collection, consisting of leather made products that don’t have the Coach logo, drove the brand’s penetration of the $400 and above price bracket, which represented 50 percent of Coach sales in the quarter, up 30 percent from last year.

Coach also opened two flagship stores in the last quarter, one on New York’s Fifth Avenue and one on London’s Regent Street, with plans to open one in Milan during Milan Fashion Week this February and another in Malaysia this year. Luis said these stores are part of Coach’s “experiential marketing” push, which includes more personalized sales interactions and in-store events for preferred customers. Coach also launched its leather service bars in 26 stores, offering free and instant monogramming and leather conditioning as well as Coachmoji printing, with plans to open 12 more bars this year.

“In the last year, Coach stores had a noticeably different feel, from customer service to how they talk about their items to their monogram stations,” said Ramirez. “They’re listening and responding to what their customers are interested in.”

Part of Coach’s revamp strategy includes roping in a younger, entry-level customer, which the brand has approached through an iMessage app store, its global influencer social campaign and a new partnership with Selena Gomez, who is collaborating with executive creative director Stuart Vevers on a capsule collection to be released in the fall.

Gomez, who has 108 million total social followers and is the most followed celebrity on Instagram, is Coach’s answer to Tommy Hilfiger’s success with the Gigi Hadid campaign, said Ramirez.

“They want to resonate with millennials with something quirky, fun and unique,” she said. “High-profile celebrities cause a halo effect for a brand when a partnership is extensive — and that’s a lot of followers they’ll tap into.”

Original Post here

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