What Will Be The Impact of Coach’s Collaboration With Disney?

Coach (NYSE:COH) recently launched its Disney X Coach 1941 collaboration, as the company celebrates its 75th anniversary. The handbag and accessories maker teamed up with Disney for a whimsical limited edition collection, which includes a range of handbags, t-shirts, and sneakers, featuring the world’s most iconic mouse. This collection debuted on June 10, 2016 at the Coach store in Soho, New York and at Colette, in Paris, and was made available in Coach stores around the world and its website, coach.com, on June 17th.

Coach has shown signs of a resurgence, with a solid third quarter, when the company’s earnings beat consensus estimates. A turnaround of the North American business was witnessed in the quarter. The same-store sales at the retail stores were unchanged, after a number of quarters of negative comps, representing the fourth consecutive quarter of improvement. While store and mall traffic still remained soft, due to increased internet sales, more was spent per customer as compared to the previous year. The above $400 price bracket rose in penetration, forming ~40% of handbag sales, an increase from the 30% share last year, and the handbag AUR (Average Unit Retail) rose to over $300 in the quarter, the highest level seen since 2009. The International segment also reported strong growth, with China and Chinese tourists driving sales.

One of the reasons for a successful quarter was the positive response to its Coach X Peanuts collaboration, also called the Snoopy collection. During the third quarter conference call, Victor Luis, Coach’s CEO, mentioned the “exceptional response to the snoopy fashion vignette,” implying a positive reaction by customers to the company’s innovation and novelty. While Peanuts and Snoopy are well-liked, their level of popularity can’t be compared with that of Mickey Mouse. Hence, we can expect the Disney collaboration to be a massive boost to the top line in FY 2017, beginning in July of this year. While this launch may not have much of an impact on the fourth quarter results, as it was launched globally with less than two weeks of the quarter remaining, positive media coverage and feedback may result in higher than expected sales for this quarter.

Coach has also been an aggressive early mover and a pioneer in the affordable luxury segment in China, profiting in this region despite many other International luxury brands taking measures, such as dropping prices, to spur their sales. Coach has since gone from strength to strength, expanding aggressively in the region, and being rewarded with the achievement of strong growth, at a double-digit rate in the first nine months of FY 2016. The company has been relatively immune to the anti-corruption crackdown that has hurt other Western brands, due to its relatively less expensive products. The launch timing of this new collection could not be any better, with the opening of the Shanghai Disneyland on June 16th. The company’s seven stores in Shanghai can be expected to get added attention as a result of this.

Have more questions on Coach? See the links below:

• How Has Coach’s Revenue Per Square Foot Changed Over The Years?
• What Percentage Of Coach’s Stock Price Can Be Attributed To Growth?
• Why Are We Bullish On Coach?
• What Has Resulted In A Decline In North American Net Sales And A Rise in International Sales For Coach So Far In FY 2016?
• Coach’s Strong Presence In China To Help The Company In The Future
• How Did the Different Segments Of Coach Perform In Q3 2016?
• How Has The Transformation Plan Affected Coach’s North American Retail Store Count?
• Coach Q3 2016 Earnings And Revenue Beats Expectations
• What To Expect From Coach In Q3 FY 2016?
• Is Coach’s Transformation Plan Working?
• What Is The Breakdown Of The Charges Associated With Coach’s Transformation Plan?
• What is Coach’s Revenue And EBITDA Breakdown?
• Coach: Year 2015 In Review
• How Has Coach’s Revenue And EBITDA Composition Changed In The Last 3 Years?
• Is The Men’s Segment Becoming Big Business For Coach?
• By What Percentage Did Coach’s Revenue & EBITDA Decline In The Last 3 Years?
• How Will Coach’s Revenue And EBITDA Change In The Next 3 Years?
• What Is Coach’s Fundamental Value Based On Expected 2016 Results?

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