Jennifer Lopez Is Designing a $495 Bag for Coach — Here’s How Else the Brand Plans Bounce Back

As expected, Coach’s quarterly sales drop was steep, reflecting the deep impact of the pandemic. But executives at the Tapestry-owned label are confident the brand has all the right ingredients in place to bounce back during the fall and holiday seasons.

Coach is banking on ambassador Jennifer Lopez — one of fashion’s most sought-after stars of the moment — to help it fuel sales. The brand will debut a $495 J-Lo-designed bag for holiday.

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In a conference call to discuss Tapestry’s fiscal fourth-quarter earnings — Coach posted a 53% decline in revenues — Todd Kahn, interim CEO and brand president, teased the launch and detailed some of the other ways it plans to attract shoppers through a consumer-centric design strategy and more narrow product focus.

“Over the last 5 months, we have taken a dramatically more critical lens to the SKU proliferation and inventory churn,” Kahn said. “For this upcoming holiday season, we shrunk our SKU count by approximately 50%. We believe that this reduction is key to greater productivity and clearer brand messaging.”

Consumers are responding to classic styles like the Tabby bag, which the brand plans to extend with new offerings.

Overall inventory management is also crucial to the game plan, Kahn said. “For the first time in my over 12 years at Coach, we are now managing to tighter inventory turn goals while maintaining gross margins. I have made inventory turn a key performance indicator for the team, holding all of us accountable for this metric,” the executive noted.

Coach — which had been the top performer for Tapestry pre-pandemic — also is trying to bolster its relationship with consumers through being more purpose driven.

For instance, it recently teamed up with LeBron James’ More Than A Vote organization — aimed at combating voter suppression in the Black community.

“We know that consumers today emotionally connect with brands that share their values, and they are buying and supporting brands that resonate with them for that reason,” Kahn said. “We want to create relationships on the basis of authenticity. So we are extracting what is latent and real.”

Internal brand research has shown that Coach’s brand recognition “remains at an all-time high,” according to Kahn.

The key to attracting and retaining consumers, he said, will be to merge fashion and function with value and purpose. Coach’s forthcoming fall and holiday marketing campaign will highlight global brand ambassadors in candid multi-generational moments — focusing on togetherness, timelessness and family — fitting themes for this pivotal moment in U.S. history.

Obviously, the digital business is key to the equation — and Coach is investing to win in this channel.

During the last quarter, the brand unveiled custom programs for key styles like CitySole sneakers and took a new approach to the Coach Outlet digital business. Since it unveiled the changes in April, Coach said it acquired 600,000 new consumers across the channel, half of whom were Gen Z and millennials. It plans to launch a loyalty program this fall.

As digital reigns, brick-and-mortar stores will be scrutinized more heavily. In addition to emphasizing smaller-format locations, Kahn said profitability is key — and noted that some closures are possible.

“Stores are commercial ventures. They are not marketing exercises, and they will be held globally to higher profitability status,” Kahn noted.

Finally, China continues to be an important growth driver, and Coach is working on tailored assortments and deeper retail penetration. “The potential for the Coach brand in China, given the rapidly growing middle class who will likely focus their spend domestically, is vast,” Kahn said.

Coach continues to be the Tapestry brand that analysts have the most confidence in.

“We believe Coach is consumer-centric, in touch with needs and has kept up with retail trends,” wrote Jane Hali & Associates analysts in a note. “Kate Spade and Stuart Weitzman, however, are lagging in relevancy. We have not noted impactful changes to the businesses.”

There is much work ahead at the New York-based company. One analyst even asked on today’s conference call whether the brands’ might have a better future separately rather than one umbrella.

“We believe in the benefits of our multi-brand model,” answered interim CEO Joanne Crevoiserat. “We’re confident we have the right strategy to drive accelerated growth and profitability for Tapestry as well as in each of our brands.”

Each of the trio of labels’ leaders joined Crevoiserat and other executives on the call as Tapestry moves into a new chapter following the controversial departure of former CEO Jide Zeitlin.

During its fourth quarter, the company posted a loss of $70 million, with an adjusted loss of 25 cents per share, compared with the prior year’s income of $175 million and earnings of 61 cents per share. Revenues for the three months ended June 27 were $715 million, more than 52% down from last year’s $1.51 billion.

Analysts — who lowered projections to accommodate the impact of the coronavirus outbreak on business — forecasted a loss of 56 cents per share and revenues of $663.35 million.

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