Coach used to be the top aspirational brand. Its signature handbags flew off the shelves and inspired knock-offs.
But now, Coach is slipping fast. Sales are down, and Wall Street is pessimistic about the brand.
Coach's troubles can be traced to one problem, according to Pam Danziger, a luxury retail expert and president of Unity Marketing.
Coach overestimated how much its customers would spend, and priced its items too high.
The retailer also neglected its outlet stores, the biggest source of revenue.
Danziger explains in a client note:
"Coach tried to eliminate coupon promotions tied directly to its discount outlets, which are the company's biggest source of revenue, and which attracts customers looking to stretch their dollars. This mistep led to Coach reporting weak same store sales growth in the quarter ending June 30, which then caused its stock to have its worst day on Wall Street since the 9/11 attacks."
Because customers weren't buying their stuff, Coach had to overcompensate by offering heavy discounts.
To appeal to consumers, Coach is going to have to appeal to lower price points, according to Danziger.
"The number of people willing and able to pay a premium for luxury brands, like Coach, is getting smaller as this weak economy continues," Danziger said.
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