Coach is starting to shut down a huge part of its business

Coach bags macy'sMallory Schlossberg/Business InsiderCoach bags at Macy’s in herald Square.

Coach is ready to own its brand.

The company reported that even though comparable sales for its North American stores were up 2%, department store net sales were down in the “high single digits.”

When department stores falter, it can erode a brand like Coach’s reputation.

But the company has announced this morning that come fiscal 2017 —  which is next quarter for Coach — it would be shuttering 25% of its 1,000-plus wholesale locations along with a “reduction in markdown allowances.”

This is to preserve the brand’s status, something the brand has been working to resuscitate after being deemed too ubiquitous and promotional.

Coach CEO Victor Luis told Brian Sozzi of The Street in a Periscope interview that, “These moves are really meant to reduce the smallest doors that we have, and to ensure in the doors that we do remain that our brand is going to be first and foremost managed effectively and not have our pricing be overly promotional, which impacts not only consumer perception about the brand but also creates confusion across the various channels.”

“Overall, we believe in the department store channel and believe it’s a great place for consumers to come in and cross shop — but, we believe most in protecting and focusing our investments in the long-term health of the brand”

In Coach’s own stores it can maintain its status and can control both promotions and presentation.

The company has been working to turn itself around with improved products and updated stores. Meanwhile, department stores remain a threat to the accessible luxury handbag category, as the brand cannot control the promotions that department stores choose to execute.

The full Periscope interview (via Twitter) with Luis and Sozzi is posted below.


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