Despite brand extensions and spin-offs in the past year, the venerable Coach brand is still fighting an uphill battle to move away from its roots. It's a common lament of legacy brands. In this case, how does a 73-year old brand inextricably linked to its leather-bound past, mired in what some might consider stodginess, become a relevant luxury fashion brand again?
The latest gambit for Coach in its image makeover is to make a splash at the influential Mercedes-Benz New York Fashion Week that runs now through Feb. 13. In an invitation-only series of presentations, newly appointed executive creative director Stuart Vevers showcased today a line that includes the requisite handbags and shoes, but is likely to highlight the other side of Coach—its ready-to-wear lifestyle fashions and accessories for both women and men. Vevers personally invited around 500 guests, including friends of the brand and the press, according to Fashion Times.
Vevers, whose fashion credentials include stints at Mulberry and Loewe, took over creative duties at Coach from Reed Krakoff, who announced last April that, after 16 years with the company, he was striking out on his own. Actually starting as a Coach property, the Reed Krakoff label is something of an anomaly in a business populated by "real" fashion designers. New York retail consultant Robert Burke told the New York Times, "His timing took guts. The expertise and the needs in luxury fashion require a different skill set." Still, Krakoff is not without his fans, some of whom have a very high profile; Michelle Obama, for example, sported a Krakoff design at the 2012 inauguration of her husband, and wore another to have her official portrait done last year.
While Krakoff is pursuing his own path, it was his vision that drove Coach to broaden its business in the first place. Now Vevers is left, so to speak, holding the bag. Vevers joined the firm in October, just months before new CEO Victor Luis replaced Lew Frankfort, who has been with the company since 1979 and is now Executive Chairman. Clearly Vevers and Luis have been charged with rekindling the Coach fire of its early days.
The challenge is considerable, however. Sales are down for two years running. According to CNBC, Coach has posted three straight quarters of same-store sales losses. For the second quarter of Fiscal Year 2014, the company's comparable-sales loss was 13.6 percent. The brand perception could be problematic as well, since two-thirds of Coach's North American sales come from outlets. Kimberly Greenberger, an analyst for Morgan Stanley, told CNBC, "Outlets certainly enlarge distribution opportunity; however, we believe increasing discount products in the marketplace may not be congruent with the effort to restore brand equity."
Add that to an even more serious issue: Competition. Other fashion brands, including Kate Spade and Michael Kors, have replaced Coach in the cool factor among accessible luxury brands. Michael Kors, in fact, has been on a tear. Kors himself achieved billionaire status on this week based on his company's stock price. The spike came on the heels of the company's announced financial results for the third quarter ending Dec. 28. For the quarter, total revenue increased 59 percent to $1 billion and gross profit increased over 61 percent. Revenue grew 144 percent in Europe and 51 percent in North America. There are currently over 530 Michael Kors stores worldwide, and the brand is still expanding. Kors announced plans to enter men's fashion with the launch of its fall men's line.
The Motley Fool's Rick Munarriz comments that, "It's clear that Michael Kors has grabbed tastemaster baton from Coach. Well-to-do fashionistas who once wouldn't leave home without their Coach handbags are now heading out with purses carrying the MK logo. There is no such thing as a timeless brand when it comes to luxury fashion."
Will New York Fashion Week be the spark that reignites a teetering brand, or will it be the beginning of Coach's last stand?