Coach Shares Slump After Ditching Outlet Coupons

nyshopaholic

Chanel & LV
O.G.
Jul 8, 2006
2,106
268
My apologies if this has already been posted somewhere :flowers: Coach should hire some of tPF members who called this outcome at the beginning of this initiative!

Coach pays price for ditching coupons; shares slump
http://www.cnbc.com/id/48427796
Published: Tuesday, 31 Jul 2012 | 5:11 PM ET

(Reuters) - Leather goods maker Coach Inc <COH.N> suffered a sharp slowdown in quarterly sales growth after an ill-timed move to eliminate coupons at its lower-price outlet stores just as the U.S. economy weakened, consumers pulled back and rivals stepped up bargains.

The results drove Coach shares down nearly 19 percent, their worst single-day drop since just after the September 11 attacks on the World Trade Center and the Pentagon.

Sales at North American stores open at least a year rose 1.7 percent during the quarter that ended June 30, well below what Wall Street was expecting and the pace of preceding quarters.

The company said the slowdown at its outlets, its biggest source of revenue, accounted entirely for the sluggish numbers.

"An increasingly promotional environment in North America led to slower growth," Chief Executive Lew Frankfort told analysts on a call, noting that shoppers' appetite for coupons was "insatiable."

Much of Coach's trouble was self-inflicted. Coach incorrectly bet earlier this year that it could wean shoppers off the coupons that are part and parcel of the shopping experience at its outlet stores.

But after only a few weeks, Coach backtracked and brought back coupons, with an almost immediate improvement in business at outlets.

For all its image as a high-end brand, Coach's factory outlets, where it sells handbags and wallets for up to 50 percent less than at its stores, generate twice as much business as its full-service stores by some estimates.

That leaves Coach more exposed to a consumer pullback than are high-end companies like Saks Inc. <SKS.N>

"Americans are very tight with their dollars, especially the segment that looks at outlets," said Paul Swinand, an analyst at Morningstar.

Spending by American consumers fell in June for the first time in nearly a year, when accounting for inflation, the Commerce Department said on Tuesday.

Price-conscious shoppers have shown before that they will balk when stores stop giving discounts. Sales at mid-tier department store J.C. Penney Co Inc <JCP.N> plummeted after it stopped offering coupons this winter. Penney CEO Ron Johnson has likened coupons to drugs, but also found himself forced to backtrack on efforts to wean shoppers off discounts.

ECONOMIC VICTIMS?

Coach also saw the economy take a toll, as it has on consumer companies as diverse as Starbucks Corp <SBUX.O>, Chipotle Mexican Grill Inc <CMG.N> and Tiffany & Co <TIF.N>. All have warned in recent weeks that the U.S. consumer is under stress.

Coach expects North American same-store sales to be up by a low- to middle-single-digit percentage, compared with a 6.6 percent jump last year, and Frankfort warned of "a softening global macroeconomic outlook" and continued challenges in North America.

In the combined period of May and June, same-store sales at mid-tier chains like Macy's Inc <M.N> and Kohl's Corp <KSS.N> and discounter Target Corp <TGT.N> underperformed those at chains like Nordstrom Inc <JWN.N> and Saks.

"You are worried about the core middle-income U.S. consumer," said Brian Sozzi, chief equities analyst at NBG Productions.

The S&P Retail Index <.RLX> fell 1.75 percent on Tuesday while the broader S&P 500 <.SPX> <.INX> was down 0.4 percent.

Shares of Ralph Lauren Corp <RL.N>, which like Coach also sells a lot of inexpensive wares, ended 1.9 percent lower at $144.34 on Tuesday. Ralph Lauren reports quarterly results next week.

The economy so far has not taken the same toll on all of Coach's "affordable luxury" competitors. Michael Kors Holdings Ltd <KORS.N> forecast in June that same-store sales would rise 35 percent in the current quarter, while Fifth & Pacific Cos Inc's <FNP.N> kate spade saw same-store sales rise 34 percent in the latest quarter.

Michael Kors "is very clearly aiming to build assets nearby Coach's full price and factory outlet stores to attack Coach's dominant market share," UBS analyst Michael Binetti wrote in a note.

Coach said overall revenue in its fiscal fourth quarter that ended June 30 rose 12 percent to $1.16 billion, below the $1.2 billion that Wall Street analysts were expecting, according to Thomson Reuters I/B/E/S.

Net income was $251.4 million, or 86 cents per share, compared with $202.5 million, or 68 cents, a year earlier. That was a penny above what analysts were expecting.

The company continued to benefit from its overseas business. Same-store sales in China, where it is expanding quickly, rose by a double-digit percentage. Sales in Japan, its second-largest market, rose 16 percent, excluding the impact of currency.

Coach shares fell 18.6 percent to close at $49.33 on the New York Stock Exchange on Tuesday.

(Reporting by Phil Wahba in New York; Editing by Maureen Bavdek, John Wallace, Jan Paschal and Matthew Lewis)
 

curlsjang

Member
Sep 14, 2006
1,265
0
Thanks for sharing! Yes tPFers predicted this will happen when they stopped the coupons. I too, stopped going to the outlets in the last few months as the stores were filled with MFFs and there was no extra discount. I just saw one of my fav outlet managers yesterday and she was so happy to see me!
 

katev

"The Bag Whisperer!"
O.G.
Dec 18, 2009
16,603
17,465
I have also found it easier and easier to stay away from the outlet because of many of Coach's recent sales strategies (e.g., no coupons, no jewelry, smaller discounts on FP deletes, fewer FP deletes, fewer good bags in clearance, etc.)

A couple of months ago I needed to go to the outlet mall for a non-coach purchase. Of course I stopped in at Coach but I don't think that I bought anything. I was surprised to see that the store wasn't very busy even though it was the weekend. The stanchions were all set up outside but there was no line to get in. As I walked through the mall I noticed a huge line waiting outside of the Vera Bradley outlet because they were advertising a "take an extra XX% off everything today!" sale.

I remember thinking to myself, "I wonder if Coach will get the message and bring back the coupons?!" Well, I guess they finally figured it out!
 

CA-Anonymous

Kelly B.
O.G.
Jul 7, 2008
3,381
19
Thanks for posting...very interesting read.


I'm no economics whiz or anything but here's an idea for Coach.....

LOWER YOUR PRICES on your FP merchandise by about 30% across the board and you'll sell more there, PLUS since they'll be less unsold inventory going to the outlets, the consumers will get out of the, "I'll wait till it hits the outlet/will only buy when there are coupons" mentality that a lot of us TPFer's and bargain hunters in general, have come to expect.


...oh yea, and maybe do a better job w/ QC up-front so you don't have as many people having to return/exchange/re-turn things that are damaged in transit to/from your manufacturer/stores/warehouses/customers. I'm sure that's a lot of Admin. type overhead you'd save right there. Just my .02!
 

Shoebaglady

~Totes & Pockets~
Oct 5, 2011
5,643
157
CA-Anonymous said:
Thanks for posting...very interesting read.

I'm no economics whiz or anything but here's an idea for Coach.....

LOWER YOUR PRICES on your FP merchandise by about 30% across the board and you'll sell more there, PLUS since they'll be less unsold inventory going to the outlets, the consumers will get out of the, "I'll wait till it hits the outlet/will only buy when there are coupons" mentality that a lot of us TPFer's and bargain hunters in general, have come to expect.

...oh yea, and maybe do a better job w/ QC up-front so you don't have as many people having to return/exchange/re-turn things that are damaged in transit to/from your manufacturer/stores/warehouses/customers. I'm sure that's a lot of Admin. type overhead you'd save right there. Just my .02!

Well said!
 

LVoeShopping

Bags-Shoes-Polish
Jan 6, 2012
4,243
4
CA-Anonymous said:
Thanks for posting...very interesting read.

I'm no economics whiz or anything but here's an idea for Coach.....

LOWER YOUR PRICES on your FP merchandise by about 30% across the board and you'll sell more there, PLUS since they'll be less unsold inventory going to the outlets, the consumers will get out of the, "I'll wait till it hits the outlet/will only buy when there are coupons" mentality that a lot of us TPFer's and bargain hunters in general, have come to expect.

...oh yea, and maybe do a better job w/ QC up-front so you don't have as many people having to return/exchange/re-turn things that are damaged in transit to/from your manufacturer/stores/warehouses/customers. I'm sure that's a lot of Admin. type overhead you'd save right there. Just my .02!

This. :goodpost:
 

katierose

Loves Charms & Bags
O.G.
Feb 17, 2009
9,019
18
Thanks for posting...very interesting read.


I'm no economics whiz or anything but here's an idea for Coach.....

LOWER YOUR PRICES on your FP merchandise by about 30% across the board and you'll sell more there, PLUS since they'll be less unsold inventory going to the outlets, the consumers will get out of the, "I'll wait till it hits the outlet/will only buy when there are coupons" mentality that a lot of us TPFer's and bargain hunters in general, have come to expect.......

Every time I drop into the FP Coach stores in the malls they are empty, no customers at all. The SAs are just standing around chatting. I think it would help FP business if they had sales more often. And why not sell the older bags there in the FP store instead of shipping them off to the outlets?
More people would go into the stores if they had the chance to pick up something on sale, and that would mean more of the (much needed) buying customers in the FP stores.

I think they are trying to be more like the other designers or more exclusive, but that shipped has sailed, because they ship the FP bags to the outlets where they sell for much lower prices along with thousands of low priced MFF bags.
 

CA-Anonymous

Kelly B.
O.G.
Jul 7, 2008
3,381
19
Every time I drop into the FP Coach stores in the malls they are empty, no customers at all. The SAs are just standing around chatting. I think it would help FP business if they had sales more often. And why not sell the older bags there in the FP store instead of shipping them off to the outlets?
More people would go into the stores if they had the chance to pick up something on sale, and that would mean more of the (much needed) buying customers in the FP stores.

I think they are trying to be more like the other designers or more exclusive, but that shipped has sailed, because they ship the FP bags to the outlets where they sell for much lower prices along with thousands of low priced MFF bags.

Exactly x 2........Sheesh, Coach should really hire some of us TPF'ers who are more in touch w/ their business/customer habits than they seem to be!
 
Dec 1, 2008
3,326
229
Thanks for posting...very interesting read.


I'm no economics whiz or anything but here's an idea for Coach.....

LOWER YOUR PRICES on your FP merchandise by about 30% across the board and you'll sell more there, PLUS since they'll be less unsold inventory going to the outlets, the consumers will get out of the, "I'll wait till it hits the outlet/will only buy when there are coupons" mentality that a lot of us TPFer's and bargain hunters in general, have come to expect.


...oh yea, and maybe do a better job w/ QC up-front so you don't have as many people having to return/exchange/re-turn things that are damaged in transit to/from your manufacturer/stores/warehouses/customers. I'm sure that's a lot of Admin. type overhead you'd save right there. Just my .02!


SO TRUE! GOOD POST! :tup:
 

pslpursemom

Member
Feb 25, 2012
748
0
CA-Anonymous said:
Exactly x 2........Sheesh, Coach should really hire some of us TPF'ers who are more in touch w/ their business/customer habits than they seem to be!

Or at the very least contact us for their focus groups, they could really find out a lot, I mean we are so in touch with Coach, more so than they could imagine...
 
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