Coach Stops Shop Sales And Frantically Discount Business Models

Victor Luis, chief executive of Coach, said the company plans to no longer discount sales and close poor stores, focusing on product design and product quality.

The picture shows the recently closed Coach Hongkong central store.

Coach is trying to revise its business mode.

Coach has made a classic mistake, that is, using brand reputation to fall into many high-speed development.

Common pitfalls include rapid business expansion, large number of shops, and discounts to retain customers.

The final negative effect is that consumers will never pay for the Coach handbag priced at $600.

Hkon Helgesen, a retail analyst, wrote: "Coach is a typical company that has been harbored by its own success.

Its products have become ubiquitous, which is the most unacceptable thing as luxury goods, and the exclusiveness of luxury concept has disappeared.

According to Morgan Stanley, Coach now controls 17% of the American handbag Market.

Two years ago, its share stood at 24%.

But the company is trying to correct its mistakes.

Coach has been decorating stores, reducing sales promotion and providing new designs that consumers are willing to accept.

These efforts seem to have worked slightly.

For the Coach brand, turnover fell by 9.3% in the latest quarter.

Compared with last year's two digit decline, it has improved.

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In the past six months, Coach sold 30% of the total handbag sold by discount stores, while Michael Kors and Kate Spade sold only 13% of the total sales of handbags.

After Coach announced its quarterly high profit report, its share price rose 6% to $32.37 per share.

The report shows that profits in the first quarter were 96 million 400 thousand dollars and diluted 35 cents per share, down from 119 million 200 thousand dollars last year.

But Coach has created two digit growth in the European and greater China markets.

North American market turnover fell by 11%, mainly because the company reduced sales activities in some stores.

According to quarterly turnover, this quarter is the slowest decline in more than two years.

Coach net turnover decreased by 0.8%, from $1 billion 40 million last year to 1 billion 30 million US dollars, but increased by 3% on a constant exchange rate basis.

It remains to be seen whether the industry can maintain its good performance.

In the area, North America is still the problem area of Coach core brand.

North American market turnover fell by 11% to $561 million, a 10% decline on a constant exchange rate basis.

The company said the fall was a performance of phasing adjustment.

Converted by US dollars, the direct selling volume in North America dropped by 12%; on a constant exchange rate basis, it fell by 11%, which was 9.5% lower than that of the stores, which was greatly influenced by the Internet business.

On the international side, the overall turnover decreased by 3% to 369 million US dollars and 6% on a constant exchange rate basis.

In the Greater China region, the total turnover increased by 2% according to the US dollar, which mainly benefited from the weakness of the yen and increased by 3% on the basis of a constant exchange rate.

The two digit growth in mainland China offset the persistent downturn in Hongkong and Macao.

In Japan, the total turnover decreased by 10% according to the US dollar, but increased by 6% on the basis of a constant exchange rate.

European sales are still "very strong", the company said.

The company said Stuart Weitzman had a net turnover of $87 million 500 thousand this quarter.

The company's expenditure is $13 million, mainly to increase the cost of organizational efficiency, speed up the renovation and depreciation costs of stores, and the cost of brand acquisition.

The company expects to grow in the fourth quarter of fiscal year 2016 in North America, and will continue to ensure sustained growth thereafter.

A year ago, the company failed to get the expected revenue during the holidays. Sales of gifts under $100 worth of stores were dismal.

In an interview, the company CEO Victor Luis said that the problem has been resolved, and the company will invest more this year to ensure that there is sufficient financial support in this channel.

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Although global sales of handbags are volatile and the whole society is in a period of currency fluctuations and macroeconomic shocks, Luis said that the company is "entering a positive development period".

Luis said the company is on the Regent street in Britain.

In the process of relocation, retail stores in nearby areas have been acquired. Core brand Coach and Stuart Weitzman will be put together and adjacent to stores.

But CEO emphasizes that although the two brands are closely linked in the sales space, they are actually independent stores.

In addition, Luis said the company's turnover in Europe in fiscal year 2016 was $125 million.

Luis also pointed out that so far, small handbags

It is continuing.

Small handbags and skew spanking styles are highly permeable in Asia.

He explained that Asia has a more commuter lifestyle. Compared with the United States, the shoulder bag seems to be the first choice.

They prefer less logo and more leather materials, "says Luis." it also indicates our opportunities.

Andre Cohen, general manager of North America, said that the company's good momentum in the first quarter has lasted until October.

He also observed that there was an increase in the turnover of handbags, which was priced at US $300 and below, but it soon pointed out that this was not related to the low price of the brand.

Cohen explains: "the average selling price of the brand is rising with the development of the brand.

We hope to become a premium brand in the 300 US dollar range. This is something we did not achieve last year and hopefully this year.

This is very important for us to become the leading position in this field, and Coach needs to continue its efforts. "

Coach shares have fallen in the past year, down more than 10%, while in the past three years, they have fallen by more than 40%.

The company still has a long way to go.

According to a recent survey by Morgan Stanley, a large portion of Coach's turnover still comes from discount stores, while consumers are more willing to buy products such as Michael Kors and Tory Burch at full price.

But analysts at Morgan Stanley believe that the decision of the company's managers is correct. They are digging the elite from other luxury companies and trying to provide better products.

"We see the potential for Coach in the future," Kimberly Greenberger and Lauren Cassel wrote in a recent report.