Look out Bernard Arnault: Coach has another act up its sleeve.
The $2.4 billion American brand is accelerating its Legacy collection of higher-priced handbags, footwear and accessories with plans to open two stores dedicated to the collection this fall as a starting point. An industry source estimated each store can bring in anywhere from $1.4 million to $3 million in sales in its first year. It's a move that is likely to only increase Coach's competitiveness against European labels such as Louis Vuitton, Prada and Gucci and maintain the brand's stretch of double-digit growth.
The Coach success story has become a template for many global brands — and the envy of others. Legacy is one part of the strategy put together by Coach president and executive creative director Reed Krakoff and chairman and chief executive Lew Frankfort to maintain the momentum, which most recently saw the company raise its full-year guidance after reporting a 30.6 percent jump in net income for the second quarter.
"The main thing was that everything we worked on was going into building what the brand was going to become," said Krakoff, explaining Coach's growth. "We didn't do anything for one season....It's almost anything that can mess you up. You have to look at the long term and the cumulative nature of all the things you do. So whether it's designing a store window, or the store itself, a shoe, a scarf, an Internet site or a p.r. event, they all tell a story. Each one takes the customer to a different place."
Legacy is the latest new place. The stores — whose working name is Coach Legacy — will open this fall and will be located at 372-374 Bleecker Street in Manhattan and 112 South Robertson Boulevard in Los Angeles. In addition to bags, footwear and accessories, the merchandise offering will also include outerwear, apparel, fragrance and jewelry.
Small by Coach standards at approximately 1,200 square feet each, the stores will house product that is 45 percent higher in retail price than typical Coach products, ranging from $158 to $798, with an average handbag price point of $425. There are also more limited-edition styles that can raise the price, such as an alligator shoulder flap bag for $10,000. Coach's average handbag price is $300.Though Frankfort contended he is not going up against European luxury brands, the designer handbag market has reached a precipice, according to industry insiders. The entry price point for a designer bag is about $1,000, although prices recently have hit record highs — Marc Jacobs' crocodile bag for spring at $22,500 and Dior by John Galliano's $19,800 satchel are just two examples. As a result, observers predicted, many consumers will start looking for a slightly lower priced alternative from a big, brand-name house.
Mitch Kates, associate director of strategic services for Kurt Salmon Associates, said Coach could fill that up-and-coming void in the market. "A pricing strategy is an extremely important element of growing any business," he said. "[Coach is] smart, growing opportunities with niche categories that are appropriate for the brand."
Designed by Krakoff, the boutiques, which like the Legacy shop-in-shops that are already in select Coach doors, will have an intimate, residential feel with wood plank flooring, lots of furniture and signature Legacy colorful striped drapes. The stores will have cream mahogany awnings with a new horse and carriage logo, unique to the Coach Legacy stores. The Greenwich Village store, which has two entrances, will feature the building's original restored copper facade.
Upon launching Legacy last fall, Krakoff delved into the company's archives for inspiration; turning back to Bonnie Cashin, the designer who helped put Coach on the map with large and sporty bags with simple, but oversized hardware — including the now signature turnlock closure she concocted based on the rooftop latch of her convertible. The line includes bags, footwear, small leather goods, some outerwear and apparel and various accessories that imbue a sense of casual luxury with a touch of whimsy that is unmistakably all-American. Standout pieces include long clutches lined in a colorful stripe pattern, wood sole wedge sandals with bronze leather straps and totes in canvas with luxe alligator trim in sorbet colors.
"It just looked good again," said Krakoff, noting the aesthetic of the collection has a Cashin vibe, but consists of all new designs. "It's an American utilitarian flavor mixed with something sexier and more playful colorations. It was really well received. What was amazing was that it was great across all different types of customers of different ages."This fall will mark Krakoff's 10th year at Coach, and he feels confident that he achieved what he initially intended. However, his first goal is a bit more relatable. "Not getting fired, that was my first goal," mused Krakoff. "It may sound funny, but not getting fired was a practical goal."
Beyond that, Krakoff wanted to solidify the mission and aesthetic of the brand. He prides himself on being deeply involved with every element of Coach including product development, store design and even the advertising campaigns. He started photographing the ads about six or seven campaigns ago in addition to styling them, after taking copious lessons from a professor at Parsons The New School for Design.
Krakoff has become known not only for his work at Coach, but also for giving his time and expertise to the fashion and art communities. He is on the board of Parsons, is vice president of the Council of Fashion Designers of America, a mentor for the Vogue Fashion Fund and is involved with both the Cooper Hewitt Museum and the Whitney Museum. All this has shown up in his work at Coach, whether it is a limited-edition bag collaboration with artist KiKi Smith, which was done last year, or a long-term partnership, such as that with knitwear firm Lutz & Patmos, which began a collaboration with Coach on a small knitwear collection after Krakoff was introduced to the designers through the Vogue Fashion Fund. Krakoff also supports artists creating books with Ron Arad and Claude and Françoise-Xavier Lalanne.
All of the extracurricular activities, however, contribute to Coach's momentum. "I get inspired by the work that I do with [artists]," said Krakoff, adding that it always works its way into the collection.
For now, the Coach Legacy stores are a testing ground. Coach Legacy shop-in-shops will be added to several existing Coach doors and additional freestanding Coach Legacy stores are a distinct possibility.
And there are other initiatives under way that Krakoff and Frankfort believe will enable the brand to grab a greater share of the accessories market. Last month, in discussing Coach's second-quarter results, Frankfort said the company has a $7 billion playground and that "our opportunities, notably in our whole market, are boundless. We expect double-digit category growth in handbags and accessories to continue unabated in North America."The plan is to inject new styles on a monthly basis while growing such categories as jewelry and fragrance. Coach also has an aggressive store opening program in North America, adding about 40 stores over the next three years to bring its store base to 400.
Meanwhile, it's looking overseas as well, especially to China. "Over the next five to 10 years, Greater China will emerge as one of the leading luxury markets in the world," said Frankfort. "Since it's underdeveloped now, it offers the largest new growth opportunity for existing brands." The company will open 10 stores on mainland China this year and plans to have as many as 20 more by 2009.
"Our product is extremely accessible," said Frankfort. "This product is a more sophisticated product...higher prices are required. We're in a sweet spot between European luxury brands and moderate brands, where we offer great product with substantial cachet. It turns out that most of our business in Legacy is coming from existing consumers. We're not attracting a new consumer with Legacy, we're expanding to fit her needs."
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