Coach is riding in style, thanks to the firm's leather items and some savvy licensing deals. The company designs and makes (mostly through third parties) high-end leather goods and accessories, including handbags, wallets, and luggage. Coach, founded in 1941, also licenses its name for watches, eyewear, fragrances, scarves, and footwear. The luxury brand sells its wares through about 1,000 department and outlet stores (in the US and more than 20 other countries), catalogs, and its website. Macy's, Nordstrom, Saks, and others carry Coach items. It also runs more than 720 retail and factory outlet stores in North America, Japan, and China (including Hong Kong and Macau).
Despite facing an economic downturn, Coach has been banking on its upscale clientele in the US, Japan, and elsewhere to invest in its products. The company's looking to boost its global distribution efforts, mostly in North America, China, and Europe, while also improving store sales. As it rides out the recession, Coach is implementing several initiatives.
Coach is expanding its retail presence in North America, albeit prudently, in an effort to generate higher sales revenue. The company has been scaling back its once-aggressive expansion by cutting a plan for new US store openings in half: from about 40 per year to 15 in fiscal 2011. Its plan for fiscal 2012 remains the same, although Coach is reaching further into developing areas for revenue potential and opening more factory outlets than retail shops. Coach believes that ultimately there is a market to support up to 500 Coach stores in the US and 30 in Canada.
The leather goods maker is also looking at global markets to diversify and offset declines in North American sales. To that end, Coach plans to open 15 stores in the UK by 2013 as part of its push in the European luxury goods market. The company already has an exclusive arrangement with Printemps, the French department store chain, and in Spain with El Corte Inglés. It is also eyeing Germany, Italy, Brazil, and India. In Asia, Coach sees under-penetrated China as one of its largest opportunity and has plans to add 30 new locations during 2012.
Its Japanese business is where the company counts on its trendy target audience. Coach plans to open about 15 new locations in 2012 and anticipates an ultimate market penetration of up to 180 stores.
Another push for the upscale manufacturer and retailer is to build market share for its North American accessories business, which has generated almost 30% of sales since 2008. It plans to leverage its expertise in this area and aggressively pump out newer and even nicer add-on items.
Coach is also focused on cutting costs and, somewhat reluctantly, widening its target audience. It shed more than 150 jobs (about 10% of its US corporate staff) and increased its product selection across a variety of price points to court shoppers with less money to spend.
Coach's partnership with retail real estate company Simon Property Group has allowed Coach to get its foot in the door at some swanky digs where upscale customers spend more freely. The leather-goods maker has a presence in Simon's Forum Shops at Caesars Palace in Las Vegas and Roosevelt Field on Long Island. These two properties represent some of Coach's highest-volume retail operations. Coach is working with Simon Property Group to open new Coach retail shops and expand others. It's also partnering with retail regional mall developer General Growth Properties to add new Coach retail shops and expand existing ones.
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