Coach CEO Victor Luis explained on the earnings call that "for both the quarter and year, our total sales in North America were down 20 percent, impacted by our deliberate actions to curtail promotions and elevate brand perception."
The short-term pain could very well be worth it for these brands in the long run. The hope is that the stronger the brand perception among consumers, the higher the value associated with the brand, which leads to an increased willingness to pay full price.
UBS analyst Michael Binetti upgraded shares of Coach to buy from neutral after the latest results, saying he thinks the company's core North American business had bottomed, and he is looking for acceleration through fiscal year 2016.
Ralph Lauren also began to move away from promotions in the most recent quarter. On its earnings call, Ralph Lauren Chief Operating Officer Jackwyn Nemerov explained "we made the decision to be less promotional than the landscape, because we believe it's critical to protect our brand." But it wasn't without a short-term sales pinch.
"While we knew this decision could slow our revenue growth, we believed it was the right thing to do for our brand. We have seen a pickup in sales at the beginning of the second quarter. However, we remain cautious as most of the quarter remains ahead of us," Nemerov said.