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Coach: Riding the Wave of Premium Pricing
Victor Luis stood looking out the window of his office on 34th Street in Manhattan’s Hell’s
Kitchen neighborhood. It had been just over a year since he had taken over as CEO of Coach,
Inc., a position that had previously been held by Lewis Frankfort for 28 years. Under Frankfort’s
leadership, it seemed Coach could do no wrong. Indeed, over the previous decade, the 73-year-
old company had seen its revenues skyrocket from about $1 billion to over $5 billion as its
handbags became one of the most coveted luxury items for women in the United States and
beyond. On top of that, the company’s $1 billion bottom line—a 20 percent net margin—was
typical. Coach’s revenues made it the leading handbags seller in the nation. The brand’s
premium price and profit margins made the company a Wall Street darling.
Right around the time Luis took over, Coach’s fortunes began to shift. Although the company
had experienced promising results with expansion into men’s lines and international markets, it
had just recorded the fourth straight quarter of declining revenues in the United States, a market
that accounted for 70 percent of its business. North American comparable sales were down by a
whopping 21 percent over the previous year. Once the trendsetter, for two years in a row Coach
lost market share to younger and more nimble competitors. Investors were jittery, causing
Coach’s stock price to drop by nearly 50 percent in just two years. After years of success, it now
