Coach gives in, announces plans to run sales
Consumers of incredibly pricey handbags rejoice! Coach, the largest maker of luxury handbags in America and hater of discounting, has relented and will finally begin to run sales (twice a year).
The two sales, in January and June, will offer discontinued items at discounts of between 30 to 50 percent. In a note to clients, via Bloomberg News, Liz Dunn, an analyst with Macquarie Group, wrote that Coach would run an invitation-only presale between June 6 and 12. Discounts for everyone will begin after that.
While Coach has not discounted items in its U.S. flagship stores, the company’s merchandise could be found at sale prices in its factory outlets, at other retailers that sell its products, as well as on flash sales sites.
"We have never seen an outright sale on handbags in Coach stores and we are not entirely sure what the customer reaction will be," wrote Ms. Dunn. "The first sale will likely be met with criticism from the investment community and confusion from customers."
Coach has faced increased competition in recent years while at the same time expanding into other categories including clothing, eyewear, outerwear, shoes and accessories. Comp sales at stores in North America fell 21 percent for the quarter ending March 29.
A Wall Street Journal article published last month suggests that companies such as Coach, despite catering to more affluent consumers, may be suffering ill effects from the Great Recession. According to the piece, "A household at the 95th percentile — one making more than all but the top five percent — made $191,156 in 2012. That was 3.5 percent lower, in real terms, than what they earned in 2006."
- Coach to Discount Products at Stores in Break With Tradition – Bloomberg News
- U.S. Consumers Languish in the Trap of Luxury – The Wall Street Journal (sub. required)
- Coach Given New $41.00 Price Target at Sterne Agee – WKRB
What do you think the consumer reaction will be to Coach running sales twice a year? What do you see as the pros and cons of the new approach?