Different demographics for Coach

Coach is set to thrive in both the luxury and discount markets. The handbag and accessories company believes that its discount business will not affect its status as a purveyor of “accessible luxury”.

In the past five quarters same-store sales from outlets outperformed full-price store sales. The company's top discount outlet in 2005 was at Woodbury Common, outside New York, and generated about $20 million in sales. This year it should generate $25 million, the same amount as Coach's flagship store on New York's Madison Avenue.

The company has positioned itself as “accessible luxury”, with prices ranging from $138 to $798.

Nevertheless, many shoppers aim for bargains by shopping at outlets. “Women in the US have been trained to expect to be able to find a bargain if they either go through the hunt or wait for a point late in the season or are willing to buy something after the season,” chief executive Lew Frankfort told WWD.

In response to industry concern over the dilution of the brand name as a result of discount sales, Coach says that research has shown that discount shoppers and those who purchase full-price items represent two different demographic groups. The full-price customer is generally 35 and a single or newly married working woman. The outlet shopper is usually in her early-to-mid forties and a professional mother with two children.

“There is no question it is a very different mindset,” Lori Wachs, portfolio manager and retail analyst at Delaware Investments told WWD. “The one wants fashion first and the other is a discount shopper.”

Discount shoppers spend 80 percent of their Coach purchases in outlets and less than 20 percent in regular stores, says Coach. The same goes for the full-price shoppers. This means that there is less than 20 percent cross-over and the full-price items do not lose ground.

Meanwhile, the company also pointed out that full-price and outlet stores never display the same range of products.

Frankfort is bullish about Coach's position. “We are regulating the growth of factory so that our full-price business continues to lead,” he said. “We are allowing factory for now to grow at a somewhat faster rate than full price and we can expect that to level off in 2007 or so.”

www.coach.com
18 April 2006

Coach Q1 profit hike

American luxury accessories company Coach Inc reported an increase in first quarter earnings and profit margins thanks to strong sales of handbags. Net income for the quarter leapt 48 percent to $100 million (£56 million) from $68 million in the same period last year. Meanwhile net sales rose 30 percent to $449 million from $344 million the year before, exceeding analysts' expectations. Direct sales increased 29 percent to $315 million, while same-store sales in the US climbed 25.1 percent and retail sales rose 14.4 percent. Factory sales for the quarter rose 35.8 percent.

Indirect sales, which do not include Coach Japan 's sales, rose 34 percent to $134 million. Strong US department store sales and international wholesale sales were the main contributors to the good results.

"Our exceptional results again this quarter speak to the vibrancy of the Coach proposition. This consistency demonstrates the strength of the Coach brand, the sustainability of our business model, the clarity of our strategies and our ability to execute efficiently. Coach is clearly well positioned for another excellent holiday season,” said chairman and chief executive, Lew Frankfort. “Our first quarter results were fueled by innovative transitional and new fall product. Each of our monthly introductions was very well received,” he continued.

Coach's projections for the second quarter include a sales increase of 21 percent to at least $645 million. The company expects sales for the financial year 2006 to rise 23 percent to $2.1 billion. The company plans to open four more stores in the US in the second quarter, bringing the total to 10 new US stores and expansions of six existing stores. Coach Japan will open two new stores in the second quarter.

www.coach.com
26 October 2005

Coach sales up 33% in Q3

Coach Inc, announced a 51% increase in earnings per diluted share for its third fiscal quarter ended April 2, 2005. This increase in earnings from the prior year's third quarter reflected a 33% gain in net sales combined with operating margin improvement.

In addition the American accessories company announced the purchase of Sumitomo's 50% interest in Coach Japan Inc for approximately $225 million plus undistributed profits and paid-in capital of about $75 million. The purchase is expected to close at the end of the current fiscal year and be accretive to earnings in FY06.

In the third quarter, net sales were $416 million, 33% higher than the $313 million reported in the same period of the prior year. Net income rose 53% to $89 million from $58 million a year ago, and earnings per share increased 51% to $0.23 compared with $0.15 the prior year.

These results were ahead of the analysts' estimate. For the nine months ended April 2, 2005, net sales were $1.29 billion, up 31% from the $983 million reported in the first nine months of fiscal 2004. Net income rose to $291 million, up 49% from the $196 million reported a year ago.

Direct to consumer sales, which consist primarily of sales at U.S. Coach stores, increased 30% to $209 million from $160 million last year. Comparable store sales for the quarter rose 19.3%, with retail stores up 12.9% and factory store sales up 28.5%. Indirect sales rose 36% to $207 million from $153 million in the same period last year. All indirect businesses, including Coach Japan, U.S. department stores, international wholesale and special markets, contributed to this significant increase.

Coach, with headquarters in New York, is a American marketer of accessories and gifts for women and men, including handbags, small leathergoods, business cases, weekend and travel accessories, footwear, watches, outerwear, sunwear, and related accessories. The brand is sold worldwide.

www.coach.com
27 April 2005

Marchon licensee for Coach Eyewear

American accessories firm Coach announced an exclusive licensing agreement with Marchon Eyewear, one of the largest eyewear companies in the world. The agreement will give Marchon the worldwide license to manufacture and distribute both the sun and ophthalmic Coach Eyewear collections.

Kate Buggeln, Senior Vice President, Strategic Planning and Business Development at Coach, said in a statement that the new Coach Eyewear collection will allow the company to capture an increasing share of their consumers' accessory wardrobe and further strengthen the positioning as a lifestyle brand.

Coach sunwear will be sold in Coach retail stores and will be launched by Marchon in Spring 2003. Marchon also plans to unveil the ophthalmic collection later in 2003 through the company's extensive network of optical retailers.

Coach, with headquarters in New York, is a leading American marketer of fine accessories, including handbags, women's and men's small leathergoods, business cases, weekend and travel accessories, footwear, watches, outerwear, jewelry, sunwear, furniture and related accessories. Coach is sold worldwide through Coach stores, department stores and specialty stores.

Marchon is one of the largest manufacturers and distributors of fashion and technologically advanced eyewear and sunwear in the world. Headquartered in the USA, Marchon markets and distributes its products globally with regional headquarters in Amsterdam and Tokyo and sales offices serving customers in a network of over 80 countries.

www.coach.com
www.marchon.com
October 22, 2002