In the latest push to expand its product line to a wider demographic, luxury goods maker Coach will debut its first-ever standalone men's store on Friday, to determine whether an expansion on the category—or a slew of men's-specific locations—could be a profitable investment.
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Shoppers look at handbags at a Coach store in Pasadena, California.
"We're going to put it in front of the customer…and learn," said Mike Tucci, Coach's president of North American Retail. "If we have a viable concept, we'll roll it out."
With 550-square feet of selling space, the location on New York City's Bleecker Street is significantly smaller than Coach's women's stores, which average around 2,500-square feet. But it's a significant boost to the space currently allocated to the men's department, which is typically confined to small, freestanding towers within its women's stores.
This isn't uncommon, as luxury goods makers tend to cater more heavily toward women, who are more likely to splurge on pricey handbags or clothes.
"It's difficult for a guy to feel as comfortable in a Coach environment which is so decidedly feminine," Tucci said.
The Bleecker Street store will mainly focus on Coach's bag business but will offer some of its lesser known products, such as shoes and jackets, Tucci said. And with 30 percent of its products exclusive to the location, the retailer will offer more price points on its three main categories: bags, wallets and belts.
Interest in the retailer's men's offerings has increased as of late, Tucci said. Its sales growth has been outpacing that of Coach's women's collection in markets such as Asia, though at a much smaller increment.
With sales of about $1 billion, the retailer currently holds only 3 percent of the men's marketshare. But it stated on its latest earnings call a long-term goal to make the segment match its current overall marketshare of 14 percent.
"We didn't open the store down on Bleecker Street just to do one," Tucci said.
The men's concept is the latest way Coach has adapted its strategy due to the recession. It also created the lower-priced "Poppy" collection for price-sensitive consumers, and more aggressively pursued opportunities in China. This diversification has helped the company's shares rise nearly 60 percent compared to one year ago.
But it remains to be seen whether men, whose shopping is often done by women, will respond to the store. Wall Street Strategies analyst Brian Sozzi referred to the men's concept as "just another feather in Coach's cap," saying that for a modest investment, the company will receive great feedback.
"[They've created] a bunch of different potential growth levers over the longterm," he said.
Sozzi said it's too early to gauge what effect the concept might have on sales growth—or on the company's shares—in the long-term. He has maintained a "buy" rating on the stock, raising his price target to $50 from $45.
But Needham & Co. analyst Christine Chen said she believes China, not men's, is Coach's largest growth opportunity. The retailer is already tracking a year ahead of plan in that market, and in the long-term, its business could equal or surpass that in North America, she said.
She put a 12-month price target of $49 on the company.
"Investors underestimate the potential market size," she said.
Disclosures:
Chen or a member of her family has a financial interest in Coach. She has received compensation from the company based upon various factors, and offered the retailer non-investment banking related services in the past 12 months. More from Consumer Nation:
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