Coach's Holiday Strategy: Sell Like It's 2010
CNBC.com News Editor
While retailers batten down the hatches — some of them for good — in preparation for a difficult holiday season, Coach has a different strategy: Variety.
The leather-handbag maker has been rolling out new styles each month including the Madison collection of handbags, small leather goods, footwear and jewelry in early October. The company says the collection uses new materials and is prettier, drapier and much more stylish.
Jewelry is a relatively new category for Coach and the company is expanding it this holiday season. For example, their line of sterling-silver jewelry will be available at 100 new stores this year. They also just added a second fragrance in September called Legacy. Both categories comprise a relatively small share of Coach's overall sales, but the company says it adds "halo" to the brand.
“Discretionary spending is considerably down and women are very pessimistic about what the next 12 months are going to bring,” Coach CEO Lew Frankfort said in an interview on CNBC. “We need to be a lot smarter in terms of what we offer her, in terms of breadth of assortment and innovation.”
(Watch the video of Frankfort's interview on CNBC.)
Coach is fortunate that it can afford such a strategy. Frankfort said the company has $400 million in cash and no long-term debt, so it’s not subject to credit markets. For other retailers, they rely on credit to buy or make new products. The credit squeeze has already forced two retailers to go out of business(Mervyns and Linens ‘n Things)because they couldn’t get any more loans.
Coach said it will “significantly” increase its new handbag offerings through the holiday season, with the introduction of the Soho and Amanda lines in November and the Leah in December. Coach also plans to update its existing Madison collection, in both leather and an Op Art-patterned fabric. (The Op Art fabrics were inspired by the abstract geometric patterns of the Op Art movement of the late 20th Century.)
“It’s new product that excites consumers. It’s new product that brings them into stores,” Frankfort said, adding that Coach is compressing three years of innovation into one year to really bring the “wow” factor this holiday season.
When consumers walk into Coach stores this Christmas, Frankfort said, “it will be as if they’re entering our stores in 2010.”
Coach says it’s not only intensifying its range of color and fabrics but also price points. That should help broaden its appeal, particularly since luxury isn’t expected to shine as bright as it has in past years.
It’s all about “making sure our assortment is balanced,” a spokeswoman said.
On its Web site (www.coach.com), Coach offers handbags ranging from about $140 to $900, with a few limited-distribution items that can run up to $2,000. Also on the high end, there are coats that sell for as much as $4,000. For the cost-conscious shopper, there are small leather accessories and jewelry available for under $100, including a key chain for $28 or leather wristlet for $58.
The company has tempered its full-year sales projection as retailers face one of the most challenging retail climates since the Depression but still expects 10 percent growth for both earnings and revenue in fiscal 2009.
Coach’s stock has taken a beating, along with the rest of the retail sector, as worried consumers tighten their purse strings. The stock has lost two-thirds of its value since peaking above $50 on April 2007. The stock closed at $18.77 on Wednesday.
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