Coach Still Hot, But Big-Ticket Spending Cools

Coach, Inc. yesterday reported that sales for its second quarter gained 29%, to $836 million, while earnings jumped 36%--well ahead of Wall Street's predictions.

The company also said it recorded the highest comparable-store increases in its public history this holiday season, and delivered its 19th consecutive quarter of double-digit gains in same-store sales. Coach also said it was speeding up expansion plans, and now plans to open 40 stores this year instead of 30.

The brand also came in as the No. 1 luxury fashion accessory in the fourth quarter, according to Unity Marketing's Luxury Consumption Index.

Pam Danziger, president of Unity, credits Coach's intense commitment to market research for its continuing success in converting an old-name luxury brand to a hot fashion item.

A recent Unity report on Coach, which has nearly tripled its revenues in four years, said the company spends about $300 per person surveyed, and invests $4 million to $5 million on consumer insights each year.

But things weren't nearly as rosy for other luxury marketers. Luxury consumers' confidence declined to its lowest level in 2006 at the close of the fourth quarter, according to the Unity Marketing index, with the typical luxury consumer spending 3.4% less ($12,982 during the holiday quarter) than in the third quarter($13,432). The index tracks just over 1,000 luxury consumers, with an average income of $157,000 and an average age of 43.

Danziger attributed the downturn to concerns about the economy. While spending on Coach bags and other personal items was up sharply, and spending on luxury experiences (including travel and dining) showed moderate gains, a big drop in spending on home luxuries pulled overall spending levels down.

"There just isn't a lot of confidence about the country, the situation in the Middle East and the dollar," Danziger said.

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