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Coach Revamps Their Merchandise And Pitch To Rejuvenate The Sales

Coach Store

Three years ago, Coach watched its sales plummet as Americans lost interest in its iconic handbags. Today, under CEO Victor Luis, it’s in the midst of a remarkable recovery. Here’s how Coach is climbing out of purse purgatory.

It’s not every day that you hear a $3,500 leather jacket described as a bargain.

But that’s the argument Coach CEO Victor Luis is making as he shows off a piece from Coach’s new collaboration with hip luxury brand Rodarte. He runs his fingers over the hundreds of small brass rivets fashioned into a floral pattern, marveling at the craftsmanship. “These are hand-painted, cut out by hand, and stitched in one at a time,” Luis says. “In Europe they’d call this haute couture. The reality is that at $3,500, it’s a steal.”

It still sounds steep, even for a high-end retailer like Coach; after all, the average domestic sales price for one of the company’s famous handbags is only about $325. Then again, this jacket is a statement—a symbol of the strides Coach is making in reestablishing the brand’s upscale aura.

The same goes for Luis’s surroundings: the company’s spanking-new three-story, 20,000-square-foot flagship on New York’s Fifth Avenue, dubbed “Coach House.” It’s a stone’s throw from Valentino, Gucci, and Harry Winston on the world’s most expensive shopping strip. The store is guarded by a playful mascot, a 13-foot dinosaur called Rexy constructed out of 400 Coach bags.

Luis greets store staff by name and happily shows off the shop’s monogramming counter and the wall display showcasing classic Coach bags going back to the 1940s. The CEO’s favorite design touch: the mosaic floor in the store’s elevator, depicting Coach’s horse-and-carriage logo. “I’ve always wanted the store to feel like it harkens back … to our founding and to the romantic days,” he says.

Coming from Luis, that sentiment carries extra meaning. Since taking Coach’s reins in 2014, the 50-year-old executive has done what few retail CEOs have been able to do: tapped into his company’s successful past to help it compete in a difficult present. Three years ago, Coach was hemorrhaging market share, suffering the effects of a discount-fueled expansion that tarnished its brand and drove customers away. To revive the company, Luis essentially launched a campaign to recover its 20th-century mystique. He shrank the business—on purpose—and repositioned Coach as a smaller, healthier retailer, prioritizing quality over mass-market quantity.

The flagship store and the $3,500 jacket represent the quality side of the formula. Executive creative director Stuart Vevers has reinvented Coach as a player in high-end apparel—which in turn makes it easier for Coach to sell other products at a premium. But it’s the quantity part of the equation that represents the bolder move. Since 2014, Coach has closed dozens of stores, ended most online flash sales, and begun exiting hundreds of department stores, top line be damned.

The strategy caused heart-stopping sales declines; Coach’s North American revenue fell by double-digit percentages in its fiscal 2014 and 2015, and shares still trade at barely half what they did in 2012. But the tough medicine is now paying off. Coach recently reported its fourth straight quarter of North American comparable sales growth; and total sales are on track to tick up for the second year in a row in fiscal 2017, to $4.5 billion. “This company is materially healthier than it was two, three years ago,” says Craig Johnson of Customer Growth Partners, a retail consultancy. Coach is weaning customers away from deep discounts, an achievement most retailers can only fantasize about. And a few weeks ago, it announced a $2.4 billion acquisition of erstwhile rival Kate Spade, a deal that added an exclamation point to Coach’s comeback story.

 

 

By Phil Wahba

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