Coach's turnaround is finally taking hold
The retailer on Tuesday said North American same-store sales were unchanged in the fiscal third quarter.
Sure, it doesn't sound like much, but last quarter the same measure was down 4%, and this time last year comparable sales were down 23%.
And overall net sales rose 11%, also an improvement from the previous quarter.
This is a big improvement. Until recently, the fear about Coach was that it was too ubiquitous to maintain its popularity - a kiss of death for luxury brands.
The company has been working to fight that on several fronts.
In January, Wells Fargo analysts pointed to several tenets that indicated the brand was headed for a major turnaround. The firm highlighted Coach's strong marketing campaigns, its updated stores, and the leadership of creative director Stuart Vevers, who was brought on in 2013.
Further, Wells Fargo noted that Coach was selling better bags - a must for a retailer known for its handbags. By selling appealing, trendy merchandise, Coach was slated to become a fashion staple for trendy young women again.
Coach also acquired Stuart Weitzman last year, a move that has helped spur growth. Coach announced in a release that it would be acquiring Stuart Weitzman's Canadian distributor, a deal that will close in the fourth quarter. CEO Victor Luis believes this acquisition "will have an immaterial impact on this year's results," according to the release.
Now, the company believes its revival is on track.
"We have a clear strategy and a proven track record of executing transformation. The turnaround that we've achieved to date underscores our confidence in driving sustainable and profitable growth for Coach, Inc., over the long term," CEO Luis said in a press release.
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"In our view, while Coach has done much to rebuild its brand there is still further to go within North America before it sheds its image of being a ubiquitous product focused on discounting. The recent heritage campaign and the reduced promotional stance are helping to shift perceptions, and as such the direction of travel is correct," Neil Saunders, CEO of consulting firm Conlumino, said in a note to clients. "With greater emphasis on product design, marketing, and store environment Coach should be able to rebuild traction within its core North American market over the course of the next quarter."
Investors are also buying into this. The shares have climbed more than 30% since January, when the company's second-quarter earnings report beat expectations.
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