Coach Inc.: Alligators, Pythons and iPods -- Oh My

Jan. 4, 2006
The accessory maker expands product line and global presence.

For Coach, it's all about access. The company's CEO, Lew Frankfort, has even referred to Coach's diverse product lines as an "accessible luxury" that feels "like a superhighway."

From decadent reptilian handbags with hefty $5,000-plus price tags to snakeskin iPod covers that cost nearly as much or more than the device itself, no wonder it feels super. In addition, Coach Inc. -- one of IndustryWeek's IW 50 Best Manufacturing Companies in 2005 -- has its bases covered in the U.S. and abroad.

Fitting since the New York-based maker of high-end leather handbags and accessories was first inspired by a baseball glove's distinctive markings after years of use.

As for finances, Coach posted strong first fiscal quarter results, which ended Oct. 1, 2005. Indeed, earnings per share rose 53% and net sales ($449 million) were 30% higher than 2004 first-quarter figures.

Coach Inc.
At A Glance

Coach Inc.
New York, N.Y.
Primary Industry: Leather products
Number of employees: 4,200
2004 In Review
Revenue: $1.3 billion
Profit Margin: 19.8%
Sales Turnover: 1.3
Inventory Turnover: 2.2
Revenue Growth: 38.6%
Return On Assets: 42.4%
Return On Equity: 61.3%
According to an Oct. 25, 2005, press release announcing the results, Coach's primary channels of distribution grew as follows:
  • Direct to consumer sales, which now also include sales by Coach Japan (In 2001 Sumitomo Corp. and Coach jointly established Coach Japan Inc. In July 2005, Sumitomo sold its stake in Coach Japan for 14 billion yen or US$120 million.), rose 29% to $315 million from $244 million in the comparable period of the prior year. U.S. comparable store sales for the quarter rose 25.1%, with retail stores up 14.4% and factory stores up 35.8%. Sales in Japan increased by 24% in constant currency, fueled by new store openings, expansions and mid-single-digit sales gains in comparable retail locations.
  • Indirect sales, which now exclude sales generated by Coach Japan, increased 34% to $134 million from $100 million in the same period last year. Results were primarily driven by strong gains in U.S. department store and international wholesale sales, according to the press release.

"Our exceptional results again this quarter speak to the vibrancy of the Coach proposition," said Frankfort. "This consistency demonstrates the strength of the Coach brand, the sustainability of our business model, the clarity of our strategies and our ability to execute efficiently. Coach is clearly well positioned for another excellent holiday season."

While exact figures are not yet available for the 2005 holiday season spending spree, Coach did expect its biggest shopping day of the season -- Dec. 23 -- would contribute about 4% of its sales for the quarter.

According to comScore Media Metrix data, luxury goods and retail jewelry Web site traffic grew faster than any Internet category going into the 2005 holiday season.

"While sales on luxury goods sites are significant, most visitors use these sites to research a potential offline purchase," says Peter Daboll, president and CEO of comScore Media Metrix, which provides Internet audience measurement services.

The report found that topped the Jewelry/Luxury Goods/Accessories category with 2.71 million unique visitors.

If Coach parlayed just 1% of that site traffic into actual sales of an average of $198 (that's the going rate of a low-end handbag) the sales would be $5.4 million -- and that's a conservative estimate. Think if everyone bought those snazzy Alligator handbags at $5,450 each!

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