After years of discounting prices and declining sales, Coach appears to be making a comeback. The handbag label reported on January 26 that net sales increased by 7 percent to $1.27 billion for its second fiscal quarter that ended December 26. Growth in China and its men’s lines were responsible for much of the increase. Investors welcomed the good news. Shares rose by as much as 12 percent.
There were also signs that years of declining sales in North America may be coming to an end at last. Comparable sales declined by 4 percent in the quarter. That was the eleventh quarter in a row with declines, but it was the smallest drop in over two years. Coach executives expect the company to begin growing again in North America by the end of the fiscal year.
Coach’s sales peaked in 2012 but have since been declining. Coach invested a lot in discount factory stores that increased sales and helped it compete with rivals like Michael Kors and Kate Spade. However, the trend caused Coach to be viewed as a handbag label for the masses, not a maker of quality luxury leather goods that had been in business since 1941.
CEO Victor Luis took over three years ago and made sweeping changes. Coach dramatically reduced the number of discounts offered at outlet stores, which by some estimates make up 70 percent of sales. That led to several quarters with declines of over 20 percent in North American comparable sales. The company moved away from handbags decorated with logos, hired designer Stuart Vevers, and closed many stores in malls.
The shift in approach has been paying off. Shoppers are buying more expensive bags, and Vevers’ designs are winning praise in the fashion media. Stuart Weitzman, the luxury footwear label Coach purchased a few years ago, is successful. Coach has also been making improvements to many of its stores. It is launching some special collections in honor of its 75th anniversary that will be sold at high-end department stores.
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