Coach Has Never Faced Competition Like This Before
The handbag seller reported disappointing sales results today, but investors have been wary of the brand for months.
The brand's strategy is to expand into more of a "lifestyle brand" with categories like watches, shoes and clothing, CEO Lew Frankfort told Women's Wear Daily.
But the strategy puts Coach "in even more direct competition with other lifestyle players such as the fast-growing Michael Kors and Tory Burch," writes Alexandra Steigrad at WWD.
One of Coach's biggest issues is the emergence of similarly-priced brands like Michael Kors and Tory Burch. Those companies have exploded in recent years, and Coach now has to compete for the same customers.
Meanwhile the competition has already dominated other categories. Michael Kors watches were one of the hottest holiday items, while Tory Burch's ballet flats are said to be the basis for her fashion empire.
Coach even mentioned the growing competition in its earning release, a move that shows how serious the issue is for the company, said Brian Sozzi, chief equities analyst at NBG Productions.
"This is perhaps one of the first times in eight years I have covered Coach in which it acknowledged intensified competition," he said.
Sozzi described what happened when he observed consumers watching Coach and Michael Kors products in malls this holiday season:
"A simple exercise I did in peak holiday was to stand back and look at Coach and Michael Kors stores that are positioned next to one another to get a feel of the traffic and how the product looked visually. Bottom line is that Michael Kors crushed Coach in this non-spreadsheet test, as it also did when applying the test to department store shop in shops."
Michael Kors is not only beating out Coach in its core category, handbags, but it's also figured out the watch and clothing categories, according to Sozzi.
Perhaps Coach should spruce up its handbag assortments before rapidly expanding other categories.
DON'T MISS: How Tory Burch Became A Fashion Billionaire In Less Than A Decade >