this is very true!! its best that coach first competes with all the brands in its price range, including MK, kate spade, etc.. and then maybe move slowly on up.
Coach Raising Prices
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Since Coach reported earnings after the closing bell, on 4/29, just one week ago, the stock has tanked by 18%. The short ratio is at 8.2, underlining how a decent number of investors see the stock price declining even more from here.
Meanwhile, Coach's stock has been downgraded and has bearish vs bullish sentiment right now. Most recently, on May 1, Morgan Stanley downgraded COH from equal-weight to underweight and set a 36.00 share price target. Says Morgan Stanley,
"We believe COH's product strategy is sound, but remain cautious on over-distribution through factory outlets. Plans for brand elevation will likely take years to play out." Morgan Stanley added that rising cost pressures, falling free cash flow, increasing supplier power, brand transformation expenditures, and an elevated CapEx from the new headquarters are heavily weighing on market share and draining cash."
So perhaps, these capital pressures may be the driving force behind this price increase, but that's not helping its market cap these days at all. And that's the visible Catch-22 that Coach finds itself in right now.
Another more specific Catch-22, hanging in the balance, are the outlet cash cows. That's a huge conundrum for Coach, and Wall Street knows this--esp since the CEO addressed this directly in the conference call. Too many bags going to the outlet dilute the brand. Decreased sales at the outlets lowers cash balance even more.
Additionally, social sentiment, based on nearly 3,000 tweets, rank the stock at a hefty 80% bearish. (Source: Wall Street Journal Market Watch). Those tweets include responses to the upcoming lines, and sentiment here is weighing more on Coach's stock appeal. Should these lines not thrive, well, where will they probably go? The outlet...and Wall Street knows that the problem is, well, at least in part , back from whence we came....
In sum, the stock price chart speaks quite soundly to how investors are perceiving plans that include the price change, that is the primary topic of this thread. With that being said, for those of us here who've posted concerns, sentiment, and "ventings," well then. It appears you are seated on the more crowded "home" vs "visitors" side of the bleachers, and spectators still do tend to express their displeasure, or even boo, when a highly anticipated game isn't going so well.
Meanwhile, Coach's stock has been downgraded and has bearish vs bullish sentiment right now. Most recently, on May 1, Morgan Stanley downgraded COH from equal-weight to underweight and set a 36.00 share price target. Says Morgan Stanley,
"We believe COH's product strategy is sound, but remain cautious on over-distribution through factory outlets. Plans for brand elevation will likely take years to play out." Morgan Stanley added that rising cost pressures, falling free cash flow, increasing supplier power, brand transformation expenditures, and an elevated CapEx from the new headquarters are heavily weighing on market share and draining cash."
So perhaps, these capital pressures may be the driving force behind this price increase, but that's not helping its market cap these days at all. And that's the visible Catch-22 that Coach finds itself in right now.
Another more specific Catch-22, hanging in the balance, are the outlet cash cows. That's a huge conundrum for Coach, and Wall Street knows this--esp since the CEO addressed this directly in the conference call. Too many bags going to the outlet dilute the brand. Decreased sales at the outlets lowers cash balance even more.
Additionally, social sentiment, based on nearly 3,000 tweets, rank the stock at a hefty 80% bearish. (Source: Wall Street Journal Market Watch). Those tweets include responses to the upcoming lines, and sentiment here is weighing more on Coach's stock appeal. Should these lines not thrive, well, where will they probably go? The outlet...and Wall Street knows that the problem is, well, at least in part , back from whence we came....
In sum, the stock price chart speaks quite soundly to how investors are perceiving plans that include the price change, that is the primary topic of this thread. With that being said, for those of us here who've posted concerns, sentiment, and "ventings," well then. It appears you are seated on the more crowded "home" vs "visitors" side of the bleachers, and spectators still do tend to express their displeasure, or even boo, when a highly anticipated game isn't going so well.
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Thank you for sharing this. I am surprised that MS actually referenced the factory stores as part of the problem moving forward. Perhaps I missed it, but I don't think I have ever read the issue stated so bluntly.
I am not a fan of the fall bags, but I am holding out some hope. As for the brand itself, I am perplexed as to how they think they can make this leap. Not bashing per se, but I have bags at a higher price point and Coach just doesn't compare. Even their dust bags have gotten flimsy.
I agree that it will take YEARS to turn the brand around. Good luck Coach. You definitely choose the more difficult path. They are probably all at headquarters sporting $200 tshirts that say "Go Big or go home!" LOL. Perhaps they should have shirts for customers that say "Keep Calm and Carry Coach." LOL
Great post!
I was recently hospitalized over a minor, but not fun issue, one of the staff said this about the situation. Man, it sure seems to fit here doesnt it?!
I'll be carrying Coach because I have plenty, but I won't be buying the stock for a good while.
Thanks for the analysis proff
I was just at the Coach store the other night. The sales person said that this fall there will be big changes, They have apparently hired one of the LV designers to do Coach bags and those bags will come out in Fall.
Not sure how true but that is what I was told.
Not sure how true but that is what I was told.
Thanks. I too am surprised that MS actually referenced the factory stores in this manner, as well as how they state in their analysis how "plans for the brand elevation will take years to play out." Coming from an internationally renowned business investment firm such as Morgan Stanley, that is telling. Put differently, they are aware (as are others, even posters here) that Coach will not be able to turn around its business overnight. Though something that simplistic is addressed in Marketing 101, investors are following their analysts' lead as though this is a very golden nugget of information.
Hope the sunshine from our otherwise dreary Midwest is reaching you!
Perhaps I should be buying stock at a low price instead of buying bags! it can only go up. That's the good news!!
LOL A econ woman after my own heart! I was looking at that stock chart going....opportunity for my 401K, maybe?
LOL A econ woman after my own heart! I was looking at that stock chart going....opportunity for my 401K, maybe?
That's the way we all should be looking at this info, for sure! As our finance profs remind, don't just buy the stuff...buy the stock! Then reinvest your profits after skimming a little off for your PCE purchases
That's the way we all should be looking at this info, for sure! As our finance profs remind, don't just buy the stuff...buy the stock! Then reinvest your profits after skimming a little off for your PCE purchases
Just done!
Yep, I represented quite well this past PCE if I do say so myself. 
EXCELLENT analysis and post.
Coach cannot become an upscale brand until the mass dumping of merchandise to outlets ceases. Since the outlets are the only place Coach is really selling items reliably, this presents a huge cash flow and sales issue for Coach.
If fp non-sold items are not sent to the outlets but are instead destroyed or held in a warehouse, or left on the fp shelves, then there will be a cash flow issue. If fp items are sent to the outlets enmasse then there is an corporate image issue in regards to Coach being an upscale brand. Either way, Coach ends up failing at it's strategy to revitalize and upgrade it's corporate niche.
Simply selling high grade mff merchandise does not solve Coach's problems in my opinion either. For those that buy merchandise at the outlets and only buy "deletes", how happy would you be with the purchases you made, if those same bags had never been sold to a few of us at FP, but were always sold at the price you paid for them. How much of the driver of outlet sales is related to the notion that the outlet bags were once full price bags? Just a question......
EXCELLENT analysis and post.
Coach cannot become an upscale brand until the mass dumping of merchandise to outlets ceases. Since the outlets are the only place Coach is really selling items reliably, this presents a huge cash flow and sales issue for Coach.
If fp non-sold items are not sent to the outlets but are instead destroyed or held in a warehouse, or left on the fp shelves, then there will be a cash flow issue. If fp items are sent to the outlets enmasse then there is an corporate image issue in regards to Coach being an upscale brand. Either way, Coach ends up failing at it's strategy to revitalize and upgrade it's corporate niche.
Simply selling high grade mff merchandise does not solve Coach's problems in my opinion either. For those that buy merchandise at the outlets and only buy "deletes", how happy would you be with the purchases you made, if those same bags had never been sold to a few of us at FP, but were always sold at the price you paid for them. How much of the driver of outlet sales is related to the notion that the outlet bags were once full price bags? Just a question......
This is a really good post and as to the question you ask.........
I'm an "only buy on sale" type of shopper but I'm that way with almost everything. I tell my friends that I love quality but I'm cheap. I've been a Coach customer consistently since the 80's and I don't think I have ever paid full price for a Coach handbag as far back as I can remember. I'm one of those shoppers that buys with PCE, waits until the bag I want makes it to the outlet (or FOS), or I buy on sale from department stores. I pretty much stick to FP bags because I can usually get them for a good deal.
I think you're correct in my case. The fact that I can say "Oh, this was a bag that sold for $XXX at the FP store but I got it for 50% or 70% off at the outlet" is big for me. I'm always bragging to DH that I "only" paid $150 or $200 for this and he responds, "Yeah and it only costs Coach $20 to make it..........". I'm not sure that the bag would hold the same esteem in my eyes if it were never sold at the FP store because in my mind the "deal" is that I got a boutique bag for 70% less.
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