How Can Coach Get Rid Of MK?

Columbo ring, senior business district in Manhattan, New York.

A few steps away from the exclusive store is the Michael Kors brand store.

If consumers patronize two neighbouring shops three years ago, they may also be in similar stores.

The commodity category, even the same discount cycle, can not distinguish each other.

According to the world clothing shoes and hats net, in the past two years, the change began quietly from Coach.

The middle end of this house

We began to pay attention to the sense of form and differentiation of store layout. It is not easy for people to associate master level's "town store design" with discount.

For a long time, the old giant MOET & CHANDON Hennessy Louis Weedon has Gucci (Gucci), Bottega Veneta, Kering of Alexander McCune and Richemont from Switzerland, and the three fashion groups are three pillars in the global luxury market.

The two "light and luxurious" brands that rise in the United States, Coach and Michael Kors, are hibernating all year long, looking at this pattern.

Three years ago, Coach decided to start to move, and the company adjusted its strategy from a single brand of Coach to a group of brands.

In October 11, 2017, Coach changed the name of the holding company to Tapestry, Inc., and the trading code of the nyst changed from COH to TPR, which came into effect in October 31st.

The change of name is a landmark event in the process of Coach brand pformation and the creation of "LV group in the United States".

Coach and Michael Kors have encountered similar development bottlenecks at similar times.

Both companies hope to expand the brand line through the acquisition, rebuild the high-end positioning, and get rid of the constraints brought by the low price comfort zone.

In this competition, the development track of the global fashion industry may be rewritten.

Renamed "ambition"

When a person in charge of Coach's parent company found Carbone Smolan, a creative company in New York, raised the need to change the name of Group Holding Companies, Justin Peters, the Executive Creative Director of the company, was not surprised.

"Coach is no longer just a luggage company, but a fashion group. It is imperative for the group to reposition its packaging."

This creative genius, who has over 20 years of creative experience, has worked with Disney, the White House Millennium Council and other brand image designers, told reporters.

Changing from single brand to multi brand fashion group is a necessity. Renaming of the new name Tapestry is not a bad thing.

"It is very important that the Coach holding company is renamed, while the Coach of the holding company has not changed its name," Justin Peters told reporters.

"Holding companies are not consumer company, but serve investors and employees. After renaming, Coach will buy more brands with new names, and it will be more logical."

Coach wants to tell investors that their new positioning of fashion group is renamed directly to the three leading European fashion groups, and to become a global Coach, it also needs to show its differences.

"I am not here because I am the son of a big man," said Victor Luis, chief executive of the company, which refers to the tradition of European fashion.

The process of naming a company is not only an art but also a science.

Coach needs to express optimism, innovation, inclusiveness and other corporate culture.

Justin Peters recalled to reporters that after a large number of focus group surveys and discussions on strategic directions, Tapestry (literally plated as tapestry) stood out from thousands of alternative names and was finally named by Coach's highest decision-making level.

Victor Luis said, "we do not persist in producing in a particular country," made in France "or" made in Italy ", which is meaningless to Tapestry.

"I used to be afraid that Tapestry would sound too traditional, too elitist and reminiscent of the ornaments in European palaces, but the handicraft and craftsmanship embodied in the word finally made it the name of the holding company."

The magic of discount

Coach pformation is imminent.

The company faces at least two difficulties, making it the first place for the company to get rid of the low priced goods.

The accession of Stewart Vevers is the beginning of Coach pformation and a powerful endorsement of its extravagant identity.

In June 2013, Stuart Vevers, who worked as a designer at Mulberry and Loewe, was the chief creative director of Coach.

He has successfully released the COACH 1941 senior garment series for Coach's return to luxury high-end image.

In June 2017, Stuart Vevers was awarded the best handbag accessory Designer Award of 2017 by the American Fashion Designers Association (CFDA).

Coach will pform itself into fashion group while its brand is changing.

In January 2015, Coach bought Stuart Weitzman, a female shoe maker for $574 million.

At that time, only 9% of Coach sales came from shoes, jewelry and other non handbags.

The accession of Stuart Weitzman has filled the short board of Coach's diversified development.

Coach's long-term sales to meet the threshold consumption has brought the vast market to the company, but now it has also greatly reduced its luxury image.

Coach has also opened the international market for Stuart Weitzman through its sales network.

Coach spokesman told reporters that the acquisition of Stuart Weitzman enabled Coach's supply chain to be more effectively utilized.

In July 2017, Coach continued to spend $2 billion 400 million without any effort. It will include the Kate Spade, a luxury brand made by young people, to further complement the company's product line.

Stefano Tonchi, editor of American fashion magazine, said, "Stuart Vevers has successfully redefined Coach. People now see Coach, not the handbag, but the entire wardrobe."

Although the outside world does not know the Coach shopping list, the next takeover target is named after the company, but Victor Luis, the CEO of the company, seems to imply that it does not exclude seeking targets in Europe and Asia, and "new names should embody such inclusiveness."

Coach spokesman told reporters: "the exquisite Tapestry in history sometimes takes 10 years to complete the process, which embodies the Coach's attitude of excellence, and tapestry is a compilation of different color lines, reflecting the innovation and multiculturalism of Coach."

It seems that the company is enthusiastic about the new name.

Low price? Discount? "It will all end."

However, this pformation has not been easy.

Victor's pformation of Coach in the outside world is bold and resolute. From the perspective of internal development of the company, it does need courage to break ranks.

Coach, founded in 1941, was first made with a strong handbag made of cowhide.

In the later development, Lew Frankfort, who took office in 1995, is very impressed by the pformation of the company.

Shortly after taking office, Frankfort used "affordable luxury" as a strategic goal, attracting huge passenger traffic with low price strategy.

Although the "McDonald's in the luxury sector" is not the name for the creative people to be excited about, the initial stage of the strategy made the luxury brand from New York and the old European stores have a regional distinction, so they also gained huge economic returns and trust in the capital market.

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In October 2000, Coach successfully landed at the New York Stock Exchange, and IPO priced $16 / share.

At that time, the company's global sales volume was $550 million, and by 2013, sales had surged to $5 billion.

In 2012, Coach shares hit an all-time high of nearly $80 per share.

But when share prices chanting, the crisis began to accumulate.

Under the low price strategy, innovation and design are not so important in this company. It has a large Logo canvas bag, and is the best seller.

Before Frankfort left in 2013, the price of goods above Coach 70% was less than $400, and there were 12 discount flashes per month.

Some analysts predict that Coach North America outlets sales account for 2/3 of the total sales in the region.

These initiatives allow "discount" and "low price" concepts to be closely linked to Coach brands.

From the perspective of future development, Coach has also paid a high price in order to get rid of these labels.

The New York Times quoted people familiar with the matter as saying that at that time, Coach's creative director, Krakoff, was not satisfied with the low price strategy of CEO Frankfort.

In 2013, when Krakoff left, he said, "all this will come to an end."

A year later, Frankfort also left the company.

How to get rid of MK?

When Coach first came to the taste of cheap luxury goods, the American fashion reality show tutor, the famous designer Michael Kors, helped her behind the scenes to bring her brand back to the arena.

Judging from the future development of the two brands, Michael Kors intentionally or unconsciously "imitated" Coach, and it is also the first Domino domino on the road of Coach pformation.

Michael Kors founded its own brand in 1981. At that time, he was also a designer of Celine under the LVMH group, and the days when Michael Kors brand was appointed to the old club was depressed, and by the end of last century, the Michael Kors brand was almost bankrupt.

The early imitation of Coach made MK a great success, but now the growth enterprise in the North American market is also in the bottleneck of growth.

In 2003, Cao Qifeng, a businessman in Hongkong, bought a Michael Kors 85% stake at an ultra-low price of less than one hundred million dollars, and turned it into a treasure.

The strategic goal of Michael Kors is simple and crude: copy a Coach.

From the supply chain to the physical store design, Michael Kors and Coach are the same.

In 2014, an experiment was conducted in New York, where few people could tell whether this was a Coach store or a Michael Kors before a group of photos of a group of concealed handbags.

And this group of people is not a focus group of random experiments. They are just Coach's own salesmen.

John Idol, chief executive of Kors, said on more than one occasion to Coach's helm Frankfort, "thank you for the script you have written," citing people familiar with the matter.

Coach's "affordable luxury" plus the well-known position of Michael Kors in the fashion industry has made Michael Kors a rising star.

In December 2011, Michael Kors submitted the prospectus, and IPO finally received 10 times subscriptions. The company's overall valuation was about $3 billion 800 million, including the 100 million dollar stock of Michael Kors.

Crisis is emerging.

When Coach is fighting between the low price comfort zone and the high-end luxury image, Michael Kors also falls into a low price quagmire.

After the financial crisis, consumers' appetite for light luxury products has been saturated, and long-term discount and low price strategy can not arouse market desire.

Soon after Michael Kors created the myth of a fashion listed company, it no longer existed.

Sales growth slowed, profits fell, and same store sales fell.

By the end of 2016, Michael Kors had even lost its last indicator: revenue.

In the second quarter of 2017, Michael Kors group revenue fell 3.7%, the first quarterly decline in the company's revenue since it was launched in 2011.

At the same time, Michael Kors also lowered its annual revenue forecast.

In the earnings analysis conference, John Idol admitted that the group faced many problems, among which "excessive discount sales promotion" was one of the main problems.

Michael Kors's self help campaign and Coach are the same: diversified development, multi brand breakthrough.

In 2017, Michael Kors announced that it would spend $1 billion 170 million to acquire high-end shoe brand Jimmy Choo to complete its debut.

John Idol said this is only the beginning of the acquisition expansion of Michael Kors, "Future Ltd will buy more targets of the same size."

Michael Kors has prepared a generous pool of funds for acquisitions.

"We are not going to make any small acquisitions," John Idol said. "Michael Kors will become a global fashion luxury group. In order to achieve this goal, we have enough ammunition."

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Coach and Michael Kors, the same development bottleneck, pformed the two companies into a time race to become the first American fashion group. Coach seems to have regained its pole position through clear thinking and execution.

In the first quarter of 2017, Coach store sales in North America increased by 3%, up from 1.4% in the first quarter of three, compared with analysts' expectations.

And sales volume, the unit price of more than 400 U.S. dollars, the percentage of single products rose to 55%, an increase of 40% over the same period last year, which no doubt let the Coach of a broken boat sent a sigh of relief, such a result, will also be released on the day of the Coach earnings share price increase to six years.

Consumers are willing to pay for classics.

According to data from First Data, a business credit card service provider, the average price of the apparel industry has grown at an average annual rate of 6% over the past three years.

A NYSE trader told reporters that the strategy of Coach is in line with the consumption trend. But to become a leading fashion group, it must have the ability to produce enough good fashion classics to further raise the price. Otherwise, too high prices can only scare away the core users and play with fire.

Wall Street worries

The change in Coach and Michael Kors, though in the long run, can generate a tempting capital story, but in the short term, it still needs to be step-by-step.

Wall Street's view of M & A stories is not as optimistic as John Idol.

The capital market was once a paradise for the fashion industry, but in the pformation and integration of the industry, capital was hesitant.

In August 2017, Coach issued an annual report less than market expectations. The cost of integrating Kate Spade was too high, and the market was disappointed. Stock prices hit the lowest level in four and a half years after the annual report.

Wall Street's investment institutions are not optimistic about the pformation of Coach.

Edward Jones & Co's retail sector analyst Brian Yarbrough said Kate Spade has long relied on discounts to boost sales, and Coach has to integrate and digest some of these assets, which is a challenge in the short term.

Wall Street believes that it is no easy task to get rid of the flash buying path, which will bring downward pressure on Coach's short-term earnings.

A fashion industry analyst told reporters that at present, the two companies are discounted from the low price era stock. The discount rates of Coach, Kate Spade and Michael Kors are 42%, 36% and 40% respectively.

"The market has high expectations for acquisitions, but Kate Spade relies too much on clearing sales," Brian Yarbrough said. "Although Coach has pressed the restart button on its acquisition, it will definitely bring short-term pain."

But short term pressure is the only way for Coach Jedi to meet each other.

Wall Street's renaming of Coach is not surprising.

In a letter to customers, HSBC said that the fashion industry itself has high risk characteristics, and diversified products and brands can deepen the moat. "The reason for this company's renaming is also obvious."

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