13 Jun Luxury Brand Coach Moves to Sell Shoes
Coach (COH) has fought for relevance in recent years, first introducing bling-laden products to attract younger shoppers and then bringing back more classic lines to appease its longtime customers. Yet all the while the company remained true to its roots: finely crafted leather bags. Now, as upstarts such as Michael Kors Holdings (KORS) and Tory Burch challenge its dominance of that market in the U.S., Coach is broadening its focus in hopes of ultimately becoming a full-fledged lifestyle brand that outfits customers from head to toe.
It’s starting with shoes, a business that’s more competitive and growing more slowly than handbags. Footwear also presents challenges Coach hasn’t faced much before: While bags will always fit over a woman’s arm, shoes come in sizes, and Coach runs the risk of having too many or too few sizes in stock. And shoes don’t lend themselves to the gallerylike presentation that’s worked so well for Coach’s bags in its own stores. All that’s caused analysts to worry whether the product expansion could put the company’s legendary profitability (gross margin was 72.8 percent in its most recent fiscal year) at risk. Says Brian Pitera, a principal at consultant A.T. Kearney: “Coach’s shoe strategy is an uphill battle.”