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Canary In A Handbag: Why Coach Hit The Skids

Tyler Durden's picture




 

Submitted by David Stockman of Contra Corner blog,

For the last two decades Coach (COH) could do no wrong. Its aspirational handbags flew off the shelves at hefty prices, causing its sales to soar from $1.3 billion to $5.1 billion during the 10-years ending in fiscal 2013. Better still, its EPS soared by 6X, representing a 20% earnings growth rate over the same period. Greatest of all, its share price peaked at nearly $80 in 2012 after having opened the 21st century at $3 per share.

Needless to say, the believers and speculators who got on board for the 27X gain in twelve years were fabulously rewarded, as was its founder and largest stockholder, Lew Frankfort, who became a billionaire along the way. So the capitalist dream is still working in America, right?

Not exactly. Last night Coach announced an earnings horror show. Sales were down 21% from year ago levels, the 4th straight quarter of plunging top line results. Worse still, Coach announced that same store sales in its 544 North American stores and outlets, which account for 70% of sales, face even worse prospects in the period ahead. According to the Reuters account,

The clothes, shoes and handbags retailer said it expected North America same-store sales to fall in the “high teens” in percentage terms in the coming year.

Simply stated, a high teens same store sales decline at a luxury retail emporium is a death sentence. Accordingly, COH has now tossed its long standing business model out the window and is marching on the double in the opposite direction.

COH’s 27X share price gain since 2000 depended upon a pell mell path of retail footage expansion by which its opened dozens of new stores every year for nearly two decades and thereby drove its sales steadily upward. But now it will close 70 of its NA stores or 13% of the total. And facing upwards of a 20% decline in same store sales in the coming year that is surely only the beginning of the shrinkage.

Not surprisingly, Coach shares took a 10% hit in the aftermarket, and that’s only the last hurrah for this once high flying canary.The stock has been weakening for two years owing to its recent faltering performance, and now stands at $35/share—–down 56% from its peak and back to the price it first traded at in August 2005.

This can all be dismissed as the unfortunate life-cycle of a high flyer playing out its appointed rounds. And, indeed, the primary force knocking COH off its pedestal was two aggressive competitors in the same market for “aspirational” branded handbags, shoes and apparel goods—–that is, Kate Spade and Michael Kors.Coach Inc. stock displayed the New York Stock Exchange.

Self-evidently, the supply of aspirational buyers at Coach’s nosebleed price points was not nearly as great as the supply of competitive designs, products and merchandizing that its latter day competitors have flooded into the malls. Something had to give, but it wasn’t just old-fashioned capitalist survival of the fittest.

Instead, Coach blew it by playing the bubble finance game on the Wall Street casino—a destructive game which is part and parcel of the Fed’s misguided policy of financial repression and its wealth effects promotion of speculation in risk assets.  In a word, Coach blatantly failed to reinvest in its business in order to preserve its ample head start against its current devastating competitors. Instead, it cycled nearly all of its cash flow into stock-buybacks, thereby levitating its share price by orders of magnitude more than its total earnings, sales and sustainable cash flow.

During the 10-years ending in fiscal 2013, Coach generated about $8.6 billion in operating cash flow—that is, revenue less cash operating expense and change in working capital. But it utilized  $6.2 billion or nearly 75% of the net cash generated during its high flying days to buyback shares. By contrast, it applied only $1.5 billion to net investments in CapEx and some modest acquisitions.

Moreover, that is only half the story. Throughout the last decade COH reliably posted fat EBITDA margins of between 33-35% because that is how the high flyer momentum game is played. Open lots of stores, post fulsome cash flow margins and wait for the sell-side analysts to sharpen their hockey sticks. Next, the momo traders get on board, the CEO appears on Cramer to talk up the home gamers and its off to the races. At it peak in 2012, COH was trading at about 50X forward earnings.

Needless to say, the momo boys and girls never asked how COH could open 544 North American stores and many more abroad on virtually no CapEx. In fact, over the last decade the company’s revenues totaled nearly $32 billion, meaning that CapEx amounted to less than 5% of sales.

And realize, also, that this 5% of sales figure is essentially a low-side benchmark for maintenance CapEx in high end retail where merchandising appeal must be continuously refreshed; it doesn’t even begin to reflect the capital utilization that would be required for the pell mell opening of hundreds of new high-end stores.

The short answer, of course, is that COH didn’t need much CapEx to open stores because they were all financed through operating leases! But there are two giant problems with the rent-a-store approach to company building.

First, the cost of occupancy—which is extremely rich in the so-called in-line section of the mall were the likes of COH are positioned—becomes a fixed cash cost.  So when traffic and sales turn down even modestly, there is no cushion. Instead, there is an immediate hit to margins; and if volumes at “weak stores” fall sharply—-like 20%—-operating cash flow can dry-up completely. Suddenly, a rent-a-store high flyer is in the store closure and lease write-off business—even if this destruction of capital is dismissed as “non-recurring” by the sell side analysts who never figure out that the gig is up.

But there is another more debilitating feature. It is rarely possible to run 35% EBITDA margins in a highly competitive luxury goods market without heavy and continuous reinvestment in design, product, marketing, in-store merchandising and staff support and training. Yet operating leases—because they are a fixed cash charge to the current P&L—inevitably squeeze out discretionary cash investments in the business operations mentioned above when a high flyer is under the gun to meet the rich EBITDA margins that get embedded in analyst hockey sticks. In other words, Coach’s high EBITDA margins were deceptive and unsustainable because they masked a big lump of cash leases.

Why is it so easy to build a 550 store retail emporium on operating leases? The answer is financial repression. Mall owners have enjoyed  “cap rates” on their debt capital (most of their investment) which has been far below market clearing levels every since the Fed launched into monetary central planning and interest rate pegging.

The mall REITs, in turn, collect a generous spread between their rents and their debt carry costs, but they also accord tenants like COH an unwarranted credit rating and therefore an implicit subsidy. The latter is based on the so-called national tenant credit status of fast expanding chains like COH and the demonstrated fact that the Fed will allow no stock market bubble to stay burst. So when push comes to shove, mall owners assume that even injured high flyers, like COH is currently, will be able to obtain enough cheap financing to pay the rent.

So we have a great deformation. High-flying retail rollouts like COH drastically over-invest in stores and square footage on the way up because occupancy costs have been made sub-economic by our clueless monetary politburo. At the same time, genuine entrepreneurs like Lew Frankfort in this case, and serial scam artists more frequently, are encouraged by the momo traders and sell side analysts to drastically under-invest in products, merchandising and service.  There are few more strategic business errors than to underinvest in what’s inside when you are over-invested in fixed leases all around.  Can you say Sears?

Coach may struggle on, but what happens when the current financial bubble ends up as the third stock market crash of this century? Well, what happens is that “demand” for “aspirational leathers” among the top 10% of households will plummet. Then the canaries will be fluttering up and down the mall aisles as Coach, Kate Spade and Michael Kors duke it out for the remnant of customers who will be left.

Needless, to say the momo traders have left the scene months, if not years, ago; and Lew Frankfort has cashed in his billions and retired. What will be left is empty malls, fired staff, closed stores and billions of operating leases written off as dead-weight destruction of capital. That’s how the Fed’s bubble finance works, and how it corrodes and corrupts the vital arteries of capitalism.

Someone should take Janet Yellen to Sears….or even to Coach.

 

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Fri, 06/20/2014 - 19:03 | 4879441 starman
starman's picture

Hm they should offer discount pricing for Federa Reservel and Central Bank management. That otta fix it.

Fri, 06/20/2014 - 19:44 | 4879527 arby63
arby63's picture

Yellen already has slaves in the basement sewing Coach clones. Typical part of the debasement agenda. 

I hear they are making iGadgets next.

Fri, 06/20/2014 - 19:47 | 4879531 old naughty
old naughty's picture

So, is the [reptile] skin trade coming to a close?

Fri, 06/20/2014 - 22:42 | 4879864 I MISS KUDLOW
I MISS KUDLOW's picture

i haven't seen a worse chart in a long time its got alot to fall before any kind of support

Sat, 06/21/2014 - 08:39 | 4880268 RaceToTheBottom
RaceToTheBottom's picture

Having a business model aimed at the .01% who can afford to worry about new purses, the rest of the serfs are worrying about food....  doesn't seem logical

Fri, 06/20/2014 - 20:33 | 4879606 Stuck on Zero
Stuck on Zero's picture

I've got an idea.  Coach can produce upholstery and matching bags for GM cars.  They can then channel stuff to get their sales up.

 

Fri, 06/20/2014 - 21:42 | 4879726 californiagirl
californiagirl's picture

Actually, Coach used to produce high quality leather luggage and auto upholstery.  Their main problem now is that the designs are not interesting enough and the quality has deteriorated over the years.  Not that Kors is any better.  Many of his products (clothes, handbags, etc.) are also in a bubble due to his stint on Project Runway and cameos in movies like Devil Wears Prada.  Talk about almost KMART quality with Nordstrom prices! Not to mention that most of the bags are simple, open top (easy pick-pocket and weather-damage targets) and cavernous (lack of organization makes it difficult to find keys and other items), and therefore cheaper to make, something he shares with many Kate Spade bags.  Kate Spade at least has cuter designs. Personally, since I am not sheeple, I prefer something that every 2nd or 3rd person does not have, and quality - more like Chanel, Prada and Feragamo.  And unlike LV, 2/3 of the bags you see are not bad fakes.  Of course, Kors, is definitely designing for the sheeple and successful for it, while his popularity lasts.

Fri, 06/20/2014 - 22:45 | 4879873 I MISS KUDLOW
I MISS KUDLOW's picture

if you ever have any to throw away i'll take them to use to clean up after my rotty in the yard

Fri, 06/20/2014 - 23:55 | 4879960 californiagirl
californiagirl's picture

Actually, my classic looks-like-new Chanel bag is selling on EBAY for tripple what I purchased it for in 2003 at Saks. good luck tripling an investment on a Coach bag.

Fri, 06/20/2014 - 23:00 | 4879899 CrazyCooter
CrazyCooter's picture

At the rate things are going, ladies are going need one of these handbags when the go out ...

http://www.eberlestock.com/Gunslinger%20M%20Series.htm

Regards,

Cooter

Sat, 06/21/2014 - 09:55 | 4880348 Georgiabelle
Georgiabelle's picture

I have never owned a Coach bag, or LV, or any other bag covered with someone else's initials. I buy quality leather purses in classic styles at TJ Maxx or Marshalls at 40-70% off retail. I always look for Tignanello bags because they are very well-made, have full-zip closures, have lots of handy organizer pockets and interior zip pouches, and they look good for years with occassional cleaning with a good leather conditioner. I can't imagine paying more than $100 for a purse, but to each their own I guess. 

Sat, 06/21/2014 - 20:12 | 4881534 kareninca
kareninca's picture

I once owned five Coach handbags!  But I did not buy them.  My neighbor in Chicago, a nice African American lady, had custody of her teenage granddaughter.  The granddaughter had several part-time jobs, to earn money to buy the status symbol of her set  -  Coach bags.  But she did not care about the bags themselves; just the little leather Coach tags.  She would spend $160 (that was a lot 20 years ago), keep the tag, and give the bag to Grandma.  Grandma had enough of them, so she gave some to me; I gave her various things of course (we were friends).  I kept them a couple of years  -  they were nicely made  -  never actually used them since who needs five handbags??  -  then became vegan and gave them away.  Who wants to carry a chunk of a dead animal?  There are nice fabric purses at Goodwill.

Fri, 06/20/2014 - 22:50 | 4879879 NoPension
NoPension's picture

Shit..I knew Coach was out 8 months ago, when the Mrs. began to systematically replace her collection with Michael Kors.

Want to see fur fly? Ask why either one is better... Or why they are any better than a gunny sack.
After 31 years, I just put up with most shit. It. Is. Not. Worth. The. Fight.

Sat, 06/21/2014 - 01:58 | 4880091 cynicalskeptic
cynicalskeptic's picture

Quality has been declining which turns off even the serious Coach addicts.  It's worse in the outlets which seem to be selling stuff made specifically made to sell at lower prices.  Coach also went after the teen market big time with overly 'trendy' designs - instead of the older classics - further alienating regulars.

You know it's bad when thestore staff are calling you about 'sales'.  Problem is that the overpriced 'good' bags that ARE in demand never seem to be part of those 'sales'.

Wife has a serious addiction - or I should say 'HAD' a serious addiction.... been a while since she's gotten anything new.    I suspect our son also made her reconsider when she said something about wanting a bag in another color... he said 'why not spray paint the one you have'....lol.  Kid is very much an anti-consumer buys only what he really NEEDS type.

Used to be that upscale 'quality' DID have some merit - the 'good' stuff lasted forever.... but too many upscale purveyors got greedy and cut the quality while upping the price. 

Sat, 06/21/2014 - 02:31 | 4880112 mrpxsytin
mrpxsytin's picture

Greedy? Or just trying desperately to keep the game going for that one second longer as their superiors try to unwind the position onto the back of some pension fund? 

Fri, 06/20/2014 - 19:12 | 4879451 NoDebt
NoDebt's picture

Over-priced crap sold to fickle fashion-fleeting buyers.  Package the company how ever you like.  When the ride's over, it's over.  It's only cool to have it when you're one of the few who has it.  

If Gorge Carlin was around to do a bit on Coach it would problably start something like this:  "It's just LUGGAGE, people.  All you do is carry your STUFF in it.  And who buys this stuff?  YOU DO...."  You could almost imagine the rest.

Fri, 06/20/2014 - 21:02 | 4879666 Ness.
Ness.'s picture

Carlin doing "stuff".  Classic.

 

https://www.youtube.com/watch?v=MvgN5gCuLac

 

Fri, 06/20/2014 - 21:41 | 4879721 tarsubil
tarsubil's picture

You miss the point. $200 for a little bag with a zipper and strap is too cheap. It's too middle class (you know, the class that is being annihilated right now). The only growth is with the people at the top. They need to rebrand as $2000 little bags with zippers and a strap.

Fri, 06/20/2014 - 21:46 | 4879735 californiagirl
californiagirl's picture

For $2,000 I would buy a well-made Prada or Chanel, not a cheap piece of crap.  There are a large number of competing designers in the $200 to $500 category right now and most of them are cheap crap that would have cost less than $100 a few years ago and found at the likes of Marshall's and TJ Max.

Fri, 06/20/2014 - 22:54 | 4879889 NoPension
NoPension's picture

Let them eat cake....

Sat, 06/21/2014 - 03:31 | 4880133 californiagirl
californiagirl's picture

Oh yes! Terrible me! I work hard, have not been unemployed since the day after my 16th birthday and occasionally buy something nice for myself that is functional, classic and well made and will be beautiful for years as opposed to numerous cheap purchases that that are the flavor of the month and will be falling apart or looking like a truck ran over it in a few months. Yes. I must be truly evil because I don't need or expect a man to buy it for me and can afford it by myself. And surely I practice unspeapkable evil when I purchase good from a business that provides so many jobs to skilled employees with families to support who are not knocking out goods in Chinese sweatshops that employ numerous underaged children working for slave wages. Obviously I am an evil capitalist. Bernanke would certainly not like me because I do not shop like crazy, dread going to malls and find shopping to be more of a chore than a pleasure. I am not interested in practicing massive disposable consumption that rapidly ends up in the landfill or in leveraging the heck out of credit cards. Yup! I am to be despised. Off with my head!

Do you honestly think that if I was a vapid shopaholic only concerned with materialism that I would be reading a website like Zerohedge?

Sat, 06/21/2014 - 04:04 | 4880146 mrpxsytin
mrpxsytin's picture

The ZH goblins love to pidgeonhole people. Don't take them seriously, they rarely venture beyond their oversimplified stereotypes, racial slurs, and banal expletives. Most of the time they're actually screaming at themselves from the inside of a reflective echo chamber.

Sat, 06/21/2014 - 04:47 | 4880158 californiagirl
californiagirl's picture

I don't mind correcting them now and then, particularly if I can use a little sarcasm. After all, so many men are knowledgeable about women's fashion. Had some time on my hands while waiting at the airport to pick someone up. Time to go now.

Sat, 06/21/2014 - 07:36 | 4880219 what's that smell
what's that smell's picture

somebody in the zhedge basement is gonna get laid tonight......

a purse fetish is no more interesting than a dildo obsession....unless of course a $2000 dildo had better have twinkling LEDs and 52 vibrating modes.

CAN ANYBODY HER ME IN THIS EKKO CHAMBER?

Sat, 06/21/2014 - 08:15 | 4880259 oldmanofthesee
oldmanofthesee's picture

Wow! Sounds like those "down" votes hit a nerve?

Sat, 06/21/2014 - 11:03 | 4880453 boattrash
boattrash's picture

No down votes from me, just thinking $2000 would be a nice down Pmt. on a .50 Cal. Sorry, I forgot that you can't buy those in Cali.

Sat, 06/21/2014 - 09:47 | 4880337 angryBuddhist
angryBuddhist's picture

californiagirl - will you marry me?

Sat, 06/21/2014 - 10:03 | 4880361 Buckaroo Banzai
Buckaroo Banzai's picture

Californiagirl, don't waste time justifying yourself, men simply don't get handbags. You know what the male/female ratio is here.

Sat, 06/21/2014 - 08:43 | 4880278 RaceToTheBottom
RaceToTheBottom's picture

Or carrying around the cake.

Actually a bag to carry around your homegrown foodstuffs without advertizing that you have .... real food... might be a useful product.....  In addition to your handgun....

Fri, 06/20/2014 - 23:22 | 4879934 prains
prains's picture

for $2000 i'd buy a cheep old car and try and hit a california girl who thought having a hand bag of any size, cost, design was really that important, but come to think of it i don't think my car would last through the first 4 million women who thought such a thing was even worth a moments notice. Why does your species constantly disappoint......you're a sad lot when really somewhere in you is our salvation...yet you're so easily bought by cheap babbles

Sat, 06/21/2014 - 02:34 | 4880113 mrpxsytin
mrpxsytin's picture

cheap babbles... cheap baubles too. And the best is when you combine cheap babbles with cheap baubles. 

Sat, 06/21/2014 - 04:21 | 4880152 californiagirl
californiagirl's picture

It appears you get your ideas about all women from Hollywood or perhaps reading Jackie Collins novels. The majority of women I know do not decide on a man based on how many cheap or expensive baubles he buys for them. In fact, most of my friends make more money than their husbands or boyfriends and a couple are even paying alimony to their exes.

Sat, 06/21/2014 - 04:43 | 4880156 mrpxsytin
mrpxsytin's picture

It was a joke. Everyone knows a good woman doesn't need babbles or baubles. She just needs a strong man to protect her. ;)

Sat, 06/21/2014 - 03:45 | 4880138 californiagirl
californiagirl's picture

Yes. When hard working, successful men purchase a few nice things for themselves, they are contributing to the economy and are to be admired. However, when a woman does it with her own money, she must be run over by a car.

Sat, 06/21/2014 - 00:56 | 4880031 Buckaroo Banzai
Buckaroo Banzai's picture

Women pay $500 for a handbag that is "cheap crap"??

Son of a bitch. I'm in the wrong business.

Sat, 06/21/2014 - 05:04 | 4880168 bunnyswanson
bunnyswanson's picture

Like well-made shoes, a well-designed handbag, with strategically-placed metals, stitched to last, will last years.  I have several Doonie Bork (sp?) from 20 years ago and they look new and are classic. Shoes and handbags should compliment each other unless you like poor girl look or a mish mash kinda girl.  Leather is nice.  Paying attention to fine detail is why cost goes up.  Trends but some like me only buy a few of each color and use them a lifetime.  The Great Credit Extension made people think they were rich.  Businesses gave us good pay checks and OT (unlike most now).  It was the roaring 20s.  We got caught up in it, some of us.  This is a ploy and was designed to distract.  Americans are basically good people. 

Sat, 06/21/2014 - 10:02 | 4880360 manofthenorth
manofthenorth's picture

Man or woman makes no difference. ANYONE who would trade 100 ounces of Silver for a hand bag is a FUCKING IDIOT !

I too am in the wrong business apparently.

MON

Sat, 06/21/2014 - 11:58 | 4880538 Emergency Ward
Emergency Ward's picture

500 stores selling $500 bags!  How did I miss that?

Fri, 06/20/2014 - 19:13 | 4879460 limacon
limacon's picture

The fundamental problem with democracy .

The Madness of Crowds teaches the wisdom of Crows .

When you think your vote cannot matter , then the Crows will have you .

They will take more than they want , and waste the rest .

Fri, 06/20/2014 - 19:15 | 4879468 valley chick
valley chick's picture

Just like igadgets its good till something better comes along.  You can now get a coach bag at a yard sale cheap and in great shape.

Sat, 06/21/2014 - 10:00 | 4880355 valley chick
valley chick's picture

And this weekend could pick up many a coach bag as there is a 100 mile yard sale in NC.  Silly me will instead be on the lookout for more canning supplies for cheap.  :-) 

Fri, 06/20/2014 - 19:15 | 4879472 Caviar Emptor
Caviar Emptor's picture

Without Yuppies, the whole economic model collapses. Capitalism is indeed on the ropes, that is if it still really exists

Fri, 06/20/2014 - 21:43 | 4879728 tarsubil
tarsubil's picture

I said it a long time ago. The US empire is like an addict hopped up on PCP that has just had a bullet through his heart. He's still moving around but he's a dead man walking. The collapse has already happened. But I see more gardens every day. Like flowers blooming out of a corpse.

Fri, 06/20/2014 - 19:17 | 4879474 Seasmoke
Seasmoke's picture

Coach round trip to $3. Enjoy your flight.

Fri, 06/20/2014 - 19:45 | 4879528 walküre
walküre's picture

Coach stores are empty, Tiffany stores are at capacity.

1% spend more on the high end stuff than 99% would spend on the low end or something like that.

For 40 broke and deadbeat former GM clients, there's one Bentley cash buyer.

The low end is so annoying. They can't afford Coach? Well, let them carry Walmart bags.

Sat, 06/21/2014 - 01:30 | 4880068 Kprime
Kprime's picture

they take their coach into walmart, fill it with steaks and try to slip out looking classy.

Fri, 06/20/2014 - 19:17 | 4879477 world_debt_slave
world_debt_slave's picture

couldn't it be knock offs and/or the weather?

Fri, 06/20/2014 - 20:34 | 4879608 kaiserhoff
kaiserhoff's picture

Yes, but you forgot to BLAME BOOSH!

Fri, 06/20/2014 - 19:17 | 4879479 Chief Wonder Bread
Chief Wonder Bread's picture

Aspirational? Millenials living in the folks' basement do not do aspirational.

Sat, 06/21/2014 - 08:06 | 4880249 csmith
csmith's picture

More like "expirational".

Fri, 06/20/2014 - 19:22 | 4879487 Infinite QE
Infinite QE's picture

Coach in Chinese translates out as Gucci's brother so they flock to the shite. Must be a cash crunch for the low to mid-level Chinese zio-slaves.

Fri, 06/20/2014 - 19:28 | 4879501 kchrisc
kchrisc's picture

I have an image of the DC US economy as an errant satellite reentering the earth's atmosphere and disintegrating.

Coach just got burned off the hulk.

Fri, 06/20/2014 - 19:31 | 4879507 Spastica Rex
Spastica Rex's picture

I have a 1987 Swatch. It's made of plastic. It probably cost about 150 in 2014 US dollars. Swatch used to sponsor race cars.

Fri, 06/20/2014 - 19:42 | 4879525 walküre
walküre's picture

Does Swatch still have their own stores? I'm sorry, I don't know. Graduated fro Swatch to Tag a long time ago. Mind you that watch still looks like the first day and is never going out of style. The kind of time piece one of my kids can wear one day and keep in a safe along with part of the stack.

Fri, 06/20/2014 - 20:16 | 4879581 Urban Redneck
Urban Redneck's picture

Breguet, Harry Winston and some of the other brands they have swallowed up and turned more mass market pseudo luxury certainly still have their own stores (just like when LVMH does it). When I lived in Geneva several years ago there was a Swatch store, so I would assume they still have retail stores in Europe, but I don't remember the last time I saw one in the US.

Swatch a 10 billion CHF conglomerate monster...

Fri, 06/20/2014 - 20:21 | 4879592 FredFlintstone
FredFlintstone's picture

Is your left arm bigger and more muscular from having it carry that heavy mechanical Swiss movement all day? I have a battery-powered Raymond Weil that still looks great after 10 years, has a decent weight and at $800 I don't worry about losing it.

 

I read about Arnold's watch collection. He had about 20 that were like $800k or so. That is nuts!

Fri, 06/20/2014 - 20:24 | 4879596 Spastica Rex
Spastica Rex's picture

I worry about losing my $75 Skagen.

Fri, 06/20/2014 - 20:35 | 4879609 FredFlintstone
FredFlintstone's picture

I had a Skagen. Looked nice for a few years and then started falling apart.

Fri, 06/20/2014 - 20:45 | 4879629 I Write Code
I Write Code's picture

Yah.  I just bought a $110 Fossil who recently bought Skagen and this is Fossil's first Skagen-tech design, much thinner than most on the market today.  After a fairly thorough study there are exactly NO really attractive watches for sale today, the style is to make them huge, even though fifteen years ago they were thin.  Huge is great for showing of $1,000,000 in diamonds or $10 in rhinestones, but wtf?  Even the Rolex look so ridiculously dated, unless they're solid with bling.

Of course any watch with a solid gold case (especially oversized!) is upwards of $2k now and I wouldn't want to wear it on the street.

So I wonder if Coach is also suffering from a similar lapse in style.

Sat, 06/21/2014 - 00:25 | 4879992 holgerdanske
holgerdanske's picture

tend to agree, but look at Longjnes Classic, beautiful.

Sat, 06/21/2014 - 09:29 | 4880312 darkpool2
darkpool2's picture

Whats a watch ?

Fri, 06/20/2014 - 22:59 | 4879894 HardAssets
HardAssets's picture

I wear a G-Shock Casio that I've had 4 or 5 years. Solar powered battery doesn't need to be changed. Re-sets itself automatically every 24 hours and is accurate to within less than a second (I've checked it against a couple of atomic wall clocks & the computer clocks.)  Has various alarms & will give you the time in multiple time zones (for what that's worth).  Good to 200 meters underwater. Shock proof - - I use it all the time, including when shooting high powered handguns. I don't know if its true and don't really care, but read somewhere that Navy SEALS use them because they work, are tough, and cost effective.  Paid less than $100 for it.

 

Sat, 06/21/2014 - 01:27 | 4880063 Kprime
Kprime's picture

I starch the hair on my wrist, twirl it into a riser and hold it up to the sun.  makes a great sundial.  I'm very green. lol

Sat, 06/21/2014 - 01:02 | 4880037 lincolnsteffens
lincolnsteffens's picture

Nobody needs a pocket book. Nobody needs a watch unless they are keeping to a strict schedule. Everybody needs food, water and shelter. I haven't worn a watch since my Micky Mouse watch stopped and that was 55 years ago. I've got 4 pockets on my pants and usually two of them are empty.

Sat, 06/21/2014 - 02:03 | 4880094 cynicalskeptic
cynicalskeptic's picture

Haven't worn a watch in years.  NONE of my kids or their friends own a watch or would even think of buying one.....   If they want to know the time they check their phone.

Fri, 06/20/2014 - 19:56 | 4879542 i_call_you_my_base
i_call_you_my_base's picture

You must have used one of those classic Swatch protective covers.

Your watch might actually be worth more than $150 as a vintage item.

Fri, 06/20/2014 - 20:02 | 4879554 Spastica Rex
Spastica Rex's picture

Oh, yes - the little rubber band things were de rigueur. I was also dumb enough to think it was cool to wear multiple swatches at a time. On both wrists.

Fashion thrives on stupidity.

Fri, 06/20/2014 - 20:12 | 4879571 i_call_you_my_base
i_call_you_my_base's picture

LOL. The 80s were interesting fashion times.

Fri, 06/20/2014 - 20:17 | 4879585 NoDebt
NoDebt's picture

OK, let's end this nostalgic trip theough the 80s right now.  Two things:

MC Hammer

Parachute pants

Yeah, kinda wrecks it, doesn't it?

Fri, 06/20/2014 - 20:26 | 4879599 Spastica Rex
Spastica Rex's picture

There was nothing good about 80s fashion except for Fluevogs.

Sat, 06/21/2014 - 02:05 | 4880096 cynicalskeptic
cynicalskeptic's picture

You were almost right..... you should have stopped at:

There was nothing good about 80s

Sat, 06/21/2014 - 04:32 | 4880153 Otrader
Otrader's picture

No Facebook during the 80's = good thing.  I remember being outside with friends a lot!

Sat, 06/21/2014 - 11:26 | 4880483 boattrash
boattrash's picture

2 things about the 80's; AC/DC kept Rock n Roll from being a total wash. There's GOT to be Spandex in heaven!

Fri, 06/20/2014 - 23:12 | 4879907 HardAssets
HardAssets's picture

"Fashion thrives on stupidity."

 

You can tell a lot about a man or woman by their willingness to follow the latest 'fashion'.

Examples include the 50+ year old guys who wore ear rings when that was the fad, and all the people who ran out and had themselves tatooed nowadays (and aren't/weren't in the enlisted ranks of the military who served in a war). Fake 'tough' guy/gal, fake 'rebel', . . . . really nothing but conformists.

IMO - these things scream out   "I have no mind of my own. I am a mindless sheep & follow the herd to gain their approval. "

 

Sat, 06/21/2014 - 01:24 | 4880061 Kprime
Kprime's picture

stupidity thrives on fashion

hey, it works both ways

Sat, 06/21/2014 - 09:51 | 4880347 angryBuddhist
angryBuddhist's picture

Fashion is the uniform of the individualist.

Sun, 06/22/2014 - 19:16 | 4883989 fiatmasochist
fiatmasochist's picture

.........sorry, no..........you have fashion confused with style......

 

Sat, 06/21/2014 - 14:43 | 4880876 Ludwig Von
Ludwig Von's picture

I still wear the original one ( with the date indicator) I don 't know what year, must be mid eighties. Changing battery and the whrist band is the only cost. Cost was less than 50 Euro at that time. 

Fri, 06/20/2014 - 19:36 | 4879517 infinity8
infinity8's picture

Just do a Tar-gay line already, Coach. Fixed? (not really)

Fri, 06/20/2014 - 19:49 | 4879532 Oldwood
Oldwood's picture

BTFD on the clearance shelves?

Fri, 06/20/2014 - 19:50 | 4879534 Oath_Keeper
Oath_Keeper's picture

This is what happens when you think that your buyers don't care that the product is now made in China. My wife was a fan until they moved overseas. Why pay $400 for something that a kid was paid a nickel to make?

Fri, 06/20/2014 - 20:01 | 4879550 klynnn
klynnn's picture

I like your wife, my thoughts exactly. It's about time some of this overpriced bling was finished.

Fri, 06/20/2014 - 21:56 | 4879761 californiagirl
californiagirl's picture

Your wife is right.  And the quality went into the toilet. 

Sat, 06/21/2014 - 16:17 | 4881079 bunnyswanson
bunnyswanson's picture

Whose fault is that? Handbags are carried every day.  Unlike what you boys pay for SPECTATOR sports tickets, a handbag is used and if you buy a new one every season, you end up paying 400 dollars eventually.  The state of affairs has NOTHING to do with women and their fucking handbags you cheap son of a bitches.  When you were watching sports, counting your winning money from the fixed casino, jacking off, manufacturing was outsourced. 

Fri, 06/20/2014 - 20:01 | 4879551 Make_Mine_A_Double
Make_Mine_A_Double's picture

You get a slave in every Coach bag - now that's exclusive.

The Chicoms probably killed that guy who put those messages in the bags by now. 

 

Fri, 06/20/2014 - 20:14 | 4879575 khakuda
khakuda's picture

I like Stockman, but I don't think that he is an expert in fashion accessory businesses. Yes ultralow subsidized interest rates are causing all sorts of deformations as he says. There is no doubt capital is being misallocated all across the economy as a result of ZIRP.

But beyond blaming central bankers for all gone wrong, as fun as that is, Coach has made a lot of mistakes and ran into some pretty tough competition. Coach has never been considered super high-end. It used to be classic, made in New York, high quality, reasonably affordable mass-market luxury. And then they started selling stuff made in China and they started selling stuff through outlet centers using all kinds of couponing and promotions, cheapening the brand. They let what was once known as classic become known as clunky, old and out of date. All at a time that Michael Kors, Kate Spade and others became the cool product to have.

Who knows if they invested more money in the product and the brand if they would've called the fashion and style changes correctly. They needed the right people in place to make the right decisions.

Fri, 06/20/2014 - 20:36 | 4879611 adr
adr's picture

Replacing leather with vinyl does wonders for a luxury brand.

Fri, 06/20/2014 - 23:21 | 4879931 Jethro
Jethro's picture

Look who buys that garbage.  It's not a sophisticated shopper that appreciates quality or craftsmanship.  It's somebody after "a look".  The ghettos and trailer parks are full of sheep, begging to be sheared.

Fri, 06/20/2014 - 20:14 | 4879578 pitz
pitz's picture

If you look at most of Coach's customer base, they're also using large amounts of credit.  There are an enormous number of businesses just like this "Coach", and as financing costs go up significantly, they all dissappear or come under severe stress.  Which is why I believe the S&P500, which is chock full of such crap, is in for a very severe period of distress as the rate cycle turns.

Fri, 06/20/2014 - 20:42 | 4879622 AUD
AUD's picture

Where is it ordained that the 'rate cycle' is going to turn? What if the yield curve continues to flatten, until it is somewhere near a flat line?

Fri, 06/20/2014 - 20:34 | 4879607 adr
adr's picture

All mall stores are nothing more than channel stuffing manipulated con operations with fake accounting to pump share prices letting connected insiders cash out with millions using freshly printed Fed cash to enable share buybacks.

When I hear a good day at a publicly traded mall retailer is $1200 in sales, and these corporations claim billions in sales, it isn't hard to figure out the whole thing is a lie.

Fucking Coach is one of the worst. Selling $15 chinese plastic handbags for $300. Coach was dead as a luxury brand when the trailer park set started carrying thier handbags. You think people who set trends want to be grouped with 350lb women wearing Uggs slinging Coach bags while flopping through Walmart?

Fri, 06/20/2014 - 20:39 | 4879620 Duc888
Duc888's picture

 

 

"All mall stores........."

 

I have not set foot in a Mall in at least 10 years.  The signal to noise ratio is all askew in those places.   Same goes for a movie theater.

Fri, 06/20/2014 - 21:21 | 4879696 oklaboy
oklaboy's picture

it's an expensive bag to keep maxed out credit cards and zero balance ebt cards in....

Fri, 06/20/2014 - 21:56 | 4879760 L Bean
L Bean's picture

Their vintage items, if in good shape, are highly desirable and sell for much more than the current offerings. Just do an ebay search. I have a few myself, several that I was able to find in mint condition after 25 yrs of being in someone's closet. Coach was pretty high end at some point, it wasn't the bag of your average secretary; but then sometime in the late 90s they debased themselves for the mall crowd. Even their higher end items are total crap now. They've even tried to resurrect their classics, to no avail. Crap is crap is crap. RIP Coach, it should've happened over a decade ago.

Sat, 06/21/2014 - 09:43 | 4880331 The Most Intere...
The Most Interesting Frog in the World's picture

Everything is crap these days! You go to "restaurant" and they are microwaving frozen animal pieces or boiling bags of frozen crap they packaged in China. I can't believe people eat some of the shit that is being served in some places...

Sat, 06/21/2014 - 11:33 | 4880496 boattrash
boattrash's picture

The Most....You are correct. Tyson exports chicken to China, so it can be converted to a food-like substance (bypassing Food Death Association, or FDA) then ships it back to us for import.

Fri, 06/20/2014 - 22:12 | 4879798 yellowsub
yellowsub's picture

When it comes to growth, not showing any expansion hints at slowdowns.  Investors don't want to see that.

Fri, 06/20/2014 - 23:02 | 4879903 robertocarlos
robertocarlos's picture

It has to be made in Italy or it's worthless.

Sat, 06/21/2014 - 01:23 | 4880057 Kprime
Kprime's picture

true, unless it's made in china, relabeled, then shipped from Italy

Sat, 06/21/2014 - 03:04 | 4880124 Blankenstein
Blankenstein's picture

Not true.  Coach used to be made in the U.S. and was high quality.  No doubt some MBA thought they should make them cheaply in China and the brand name would be the selling point.  The brand WAS a selling point because it meant quality, but take away the quality and the brand name becomes tarnished, starting the brand's downward spiral.  There are many examples.  Thank the "smart" MBAs who think branding is everything.  

Fri, 06/20/2014 - 23:18 | 4879925 Jethro
Jethro's picture

From a demographics perspective, all retailers (and more specifically upper end retailers) will see tapering sales as the baby boomer generation continues to retire or adjust to a limited or fixed income...just in time for inflation.  Hopefully they can draw the parallel to the Carrousel from Logans Run and enjoy the sweet irony.

Sat, 06/21/2014 - 01:21 | 4880056 Kprime
Kprime's picture

There was a time when it was cool to

"walk like an Egyptian"

damn that Cleopatra was hot, until her outfits started showing up in walmart.

Sat, 06/21/2014 - 07:01 | 4880196 orangegeek
orangegeek's picture

Yellen - see what happens???  Hope you choke on it!!!!

Sat, 06/21/2014 - 07:52 | 4880235 csmith
csmith's picture

Assuming COH would be in the same competitive position whether they bought back stock or not, the huge buybacks were a smart move because they returned cash to shareholders instead of using it to grow a business that had a limited life cycle anyway.

Sat, 06/21/2014 - 09:25 | 4880310 The Most Intere...
The Most Interesting Frog in the World's picture

They returned the cash to shareholders before the landlords can get their hands on it. Increasingly these "landlords" are packaged REIT products which are, in essence, modern day banks. The US version of shadow banking. Absent a REIT bailout down the line there will be some major bloodletting.

Sat, 06/21/2014 - 09:19 | 4880307 skidsmango1
skidsmango1's picture

"Coach blew it by playing the bubble finance game on the Wall Street casino... Instead, it cycled nearly all of its cash flow into stock-buybacks, thereby levitating its share price by orders of magnitude more than its total earnings, sales and sustainable cash flow."

I gave up at this point.  Is this guy saying that if they would have invested more in R&D or some shit, the company would be better off?  How about the company is fucked because people quit borrowing money to buy their 'ego based' shit?

Sat, 06/21/2014 - 10:46 | 4880421 all-priced-in
all-priced-in's picture

 Eddy Lampert  (retail genius that he is LOL)could buy Coach out - move the Coach stores into all the empty Sears & K-mart space - and start selling tools and tires under the Coach brand.

/s/

 

  

Sat, 06/21/2014 - 14:13 | 4880815 presidentsarkozy
presidentsarkozy's picture

" Thehandbags and the gladrags that your grandad had to SWEAT! - so you could buy!!"

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