Coach Inc.: From Staid to Stylish

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Case Details:

Case Code: BSTR235
Case Length: 24 Pages
Period: 1941-2006
Organization: Coach Inc.
Pub Date: 2006
Teaching Note: Available
Countries: USA
Industry: Leather Goods

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"We've been enjoying a sweet spot. We created a lane called accessible luxury and it feels like a superhighway." ¹

- Lew Frankfort, CEO of Coach Inc., commenting on the positioning of the Coach brand, in December 2005.

"The Coach brand represents a unique synthesis of magic and logic that stands for quality, authenticity, value and a truly aspirational, distinctive American style." 2

- Reed Krakoff, president and creative director of Coach Inc., in May 2004.

“I don't know how you find a story that's accelerating sales growth on the top line at the same time as expanding margins as much as these guys.” ³

- Michelle J. Picard, investment analyst, Geneva Capital Management Ltd ⁴., in July 2003.

Introduction

In April 2006, Coach Inc. (Coach), a New York-based designer and marketer of superior quality, 'modern American classic' accessories, featured among the 21 top luxury fashion brands in the US in the '2006 Luxury Brand Status Index Survey of Luxury Fashion Designers' (LBSI) conducted by the Luxury Institute.⁵

The survey rated the top luxury fashion brands in the US, which included popular fashion houses like the Gucci Group (Gucci), the Hermès Group (Hermès), Giorgio Armani S.p.A. (Armani), LVMH Moët Hennessy Louis Vuitton S.A. (LVMH), The House of Chanel (Chanel), and Prada S.p.A. (Prada)

Coach was one of the few 'American' brands to have featured on the index, as the luxury products market in the US was largely dominated by European fashion labels.

However, although Coach was recognized as a luxury brand, it had a unique positioning in that the prices of its products were significantly lower than other high-end fashion labels. According to the Luxury Institute, Coach was "the strongest fashion brand among the more mass-oriented luxury brands purchased by wealthy consumers"6 in the US.

Coach, which was started in 1941, was one of the oldest handbags and accessories brands in the US. Over the years, the company became well known for its sturdy and high-quality leather handbags and accessories.

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1] “Coach still has room in the bag to grow,” http://news.findlaw.com, December 14, 2005.

2] Kitty Go, “Coach class,” www.inq7.net, May 18, 2004.

3] Kathleen Gallagher, “Coach's new styles a hit, analyst says,” http://www.jsonline.com, July 6, 2003.

4] An investment management firm based in Milwaukee, USA. It offers services in the areas of individual and institutional asset management.

5] It is an independent research institution that focuses solely on the top 10 percent of the USA's wealthy. For the 2006 LBSI, the institute surveyed more than 500 American households with a minimum of $200,000 in gross annual income and a minimum net worth of $750,000 (including home equity). (Source: www.luxuryinstitute.com)

6] www.luxuryinstitute.com