Premium Brand Power: An Investor's Guide To Coach (Part 13 of 24)
Coach, Inc. (COH) revenues and market share have been under pressure recently from newer rivals Michael Kors (KORS), Kate Spade (KATE), and Tory Burch, among others. Part of the reason—designs that haven’t quite resonated with consumers lately. Another part of the reason is that rivals like KORS have priced products slightly below Coach products. They’ve also resorted to deep discounts, which has cost Coach market share, as suggested in Part 4 of this series.
The design function is one of the most important of a fashion brand’s operations. At Coach (COH), products are conceptualized by its New York-based design team. The team also directs the design of all Coach products.
Collaboration between the design, merchandising, and sourcing teams is essential to executing design concepts that are consistent with the brand’s strategic objectives. While the sourcing teams source materials for products, merchandisers analyze sales and fashion trends and communicate these to the design teams. This helps with formulating designs for the season’s fashion lines. Merchandisers also try to maximize sales across channels by constantly analyzing, editing, adding, and discontinuing products.
Coach’s designers and merchandisers also need to communicate brand direction to licensees as well, so that they’ll address the target market for which the products are intended.
Last year, the company made a number of changes to its management and design teams. In early 2014, a new chief executive officer, Victor Luis, took over from Lew Frankfort, who’d been CEO since 1995.
Enter Stuart Vevers
In Q1 of fiscal 2014, the company recruited Stuart Vevers as executive creative director. Vevers is former executive creative director of Spanish fashion leather house Loewe, a brand that’s owned by LVMH (MC.PA) (LVMUY). He’s also done stints at Mulberry, Calvin Klein (PVH), Bottega Veneta, and Givenchy.
In 2014, Coach undertook a number of design initiatives including presenting at New York Fashion Week in February 2014 for the first time. It also launched the new Stuart Vevers collection in fall 2014.
Coach has also made a number of changes to its brand positioning, including pushing newer and pricier handbags. Handbags costing over $400 represented 30% of handbag sales in 1Q 2015, compared to 21% a year ago. It’s also ended the practice of too many flash sales—from three per week to a target of about one per month, by year end fiscal 2015.
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