Recommendation: Sell Coach
The current recessionary environment has had a strong negative impact on individual income levels, consumer spending and consumer credit availability. As a producer of high priced luxury goods Coach stands to suffer from the state of the economy as conspicuous consumption is frowned upon and consumer frugality is in fashion. These are factors that significantly impact Coach’s financial outlook as the company has experienced declines in both same store sales as well as earnings from fiscal 2008 to fiscal 2009. Coach’s gross margins are also shrinking as the company has had to increasingly rely upon its factory outlet stores to sell its products. This also presents the problem of …show more content…
The Coach brand name is associated with quality and value due to the company’s expertise in design and emphasis on providing attractive prices to customers. Coach is the market share leader for handbags and accessories in the U.S. and Japanese markets (please see Appendix 3) and is targeting emerging markets such as China for further growth opportunities. The company has cultivated an emotional attachment between its customers and its brand through continually producing superior value and being abreast of market trends. Coach products are sold through both its own retail outlets as well as other established retailers worldwide and through its online catalog. It is a consumer centric business as the company conducts rigorous consumer research in gauging changing trends and consumer interests. The company’s design and merchandising teams are well respected for collaborating to forecast fashion trends and produce quality products that are appropriate for each season.
Production begins with Coach’s New York-based design and merchandising teams. These two teams work in