Coach Proves There is Business in Handbags

Coach’s (NYSE: COH) Q4 2016 reporting proved there is still life in the handbag business as they presented positive comps for the first time in many years.

In our store visits we have recognized that Coach continues to elevate their brand and introduce more fashion forward silhouettes that are appealing to a younger and fashion conscious consumer. In fact, they have created a new category in their regular price stores, “Modern Luxury” a step above their competitors Kate Spade (NYSE: KATE) and Michael Kors (NYSE:KORS).

We recently visited one of the Coach locations in White Plains and saw their pre-fall ’16 collections, fall ’16 and the Disney collaboration. For this season they have updated their key silhouettes, the dinky, swagger tote and saddle bag with key trends including heavy embellishments from florals to metal detailing. The color palette used across the handbags is also in trend with the season’s colors of deep burgundies, forest greens, off-white’s and midnight blues.

Our View

Handbag brands are showing signs that they are responding to the consumer’s interest in non- logo and updated silhouettes. Coach continues to evolve and elevate, it is design led, a more sophisticated product.

KORS is showing signs of updating their styles in order to respond to current trends. There is a large disconnect, however, of mostly basic styles, a continuation of logo, including logo fabric bags) with a little sophisticated newness.

Kate Spade and Michael Kors compete more on pricing. We were disappointed to see the labeling of Kate Spade on all of KATE’s products. This we definitely feel had a large effect on the results they reported last week.

Overall, we believe Coach’s elevation of their brand across product, stores and campaign message sets it apart from the competition.

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