Coach mulling exit from some department stores, cutting jobs

Dive Brief:

As it works to maintain its newfound momentum, Coach Inc. said Tuesday it would cut 300 jobs worldwide, representing some 2% of its entire global workforce and 10% of its global corporate staff.
Coach CEO Victor Luis also told analysts Tuesday that it is pulling back on heavy discounting through department stores and that it may consider exiting some department stores, though he didn’t specify which ones.
The announcements came as Coach reported fiscal third-quarter results that beat expectations. Sales totaled $1.03 billion, trumping the FactSet consensus of $1.02 billion. Q3 overall net sales rose 13% year over year on a constant currency basis and 11% on a reported basis. Coach Q3 net sales rose 3% to $954 million, compared to $929 million year over year, while total sales increased 4% for the period. The retailer reported per-share earnings of 44 cents, beating FactSet expectations of 41 cents per share.

Dive Insight:

Retail futurist Doug Stephens, among others, has singled out Coach—a brand with a penchant for outlet sales and heavy discounts—as a victim of self-inflicted wounds that damaged its sense of exclusivity.

“Part of the thing about luxury is scarcity, and the unattainable nature of something that makes it seductive. So as soon as you open the funnel—doesn’t matter if you can afford it or not—it’s about seeing people at the food court with a bag that was once a rarity," Stephens told Retail Dive in November. "That Coach customer that paid $2,000 for a handbag, as soon as they see that $400 one, isn’t pleased."

That kind of brand bloodletting can be fatal, but under CEO Victor Luis, Coach seems to be reversing the damage by reducing the frequency and depth of its discounts. That strategy extends to sales in department stores, which have become increasingly dependent on price promotions to increase traffic.

Luis went so far as saying that Coach might leave some department store floors altogether—a sign of just how difficult things are for those retailers. If department stores can’t intensify the customer experience to bring in and keep shoppers, price cuts are all they really have, and that’s a downward spiral that Coach, for one, doesn’t want to follow.

Coach also also announced a major reorganization at the top of its executive ranks. Andre Cohen was promoted to president of North America and global marketing, adding North American wholesale plus global marketing, customer experience and digital to his responsibilities. Todd Kahn was promoted to president, chief administrative officer and secretary, and will expand his scope to include IT, supply chain, global environments and procurement. Meanwhile, Coach President/COO Gebhard Rainer and David Duplantis, its president of global marketing, digital and customer experience, are leaving the company.