The sales volume is so good that Coach no longer wants to sell low-priced bags.

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The sales volume is so good that Coach no longer wants to sell low-priced bags.

SOURCE Sight

2026.11.10 17:57

· From Guangdong

Full text 3173 words

Text | Source Sight, author | Wang Yan

At a time when luxury goods consumption is bleak, Coach is still making rapid progress.

Recently, Tapestry, the parent company of Coach, released its report card for the first quarter of fiscal year 2027 (as of September 26, 2026). The financial report showed that the group’s first quarter sales reached US$1.89 billion, a year-on-year increase of 11%, of which the core brand Coach achieved a 16% growth.

During the reporting period, Tapestry's operating profit margin calculated on a non-GAAP basis reached 23.2%, a year-on-year increase of 230 basis points, and its gross profit margin reached 78.7%.

In addition, based on fixed exchange rates, sales in Greater China increased by 39%, becoming a key driving force for the group's global growth.

Overall, Coach's performance growth in this round does not rely solely on discounts and volume. The average price and sales volume of its core handbag series have increased simultaneously. The "outlet" attribute has also been further weakened, and its ability to command premium prices for affordable luxury products has been restored.

On the other hand, Coach seems to still be attracting young consumers from other luxury brands. The financial report shows that Coach has vigorously promoted the acquisition of new customers globally. This quarter, there were 2.6 million new consumers, about 35% of whom were Generation Z.

A young man’s first bag

Luxury has always been an LTV (lifetime customer value) business. Obtaining the first luxury/affordable luxury bag is generally an important emotional milestone for young people (coming of age, joining a job, rewarding yourself, gifts, etc.). Consumers will even remember the brand because of this, and it is easy to form a long-term purchasing tendency.

In the past few years, the growth of regular customers in the luxury goods market has gradually peaked, and competition among the mature middle-class customer groups has become increasingly intensified. In contrast, young consumers such as Generation Z have become the main force in the increase.

But at the same time, as the uncertainty of the general environment increases and the entry threshold for top luxury goods is relatively high, many young people’s budgets have become limited. Coach just falls into the price range of "it can be reached on tiptoe, has a sense of ritual, and is not too burdensome". It is suitable to be the first choice for young people's entry-level luxury goods.

And Coach has been competing for this group.

At the performance meeting for the first quarter of fiscal year 2027, Tapestry CEO Joanne Crevoiserat revealed that during the reporting period, Coach was led by the younger generation of Generation Z customers. She believes that Generation Z is a key focus of Coach’s strategy.

Recently, Liliana Lucioni, President of Coach China, also said in an interview with the Daily Economic News that the brand wants to be the first bag that young consumers buy and become their first choice brand.

Liliana Lucioni said that more than 5 million young people in China turn 18 every year, and Coach’s penetration rate among this generation of young people is still less than 1%, which means there is huge room for growth.

It's not like other brands aren't seeing this, though.

In the Chinese market, competition among luggage brands priced between 1,000 and 3,000 yuan is fierce. Yamashita Arimatsu, Qiu Zhen, Polène, MK, Tory Burch, etc. are all vying for the first-time purchase of young people. If Coach does not stick to the label of "young people's first affordable luxury bag" and the entry point is taken away, the growth foundation of high-priced and full-price stores may be loosened.

One Coach Reform

In the early years, Coach almost had two mutually isolated systems. Among them, regular-price boutiques mainly sold mainline Collection new models, Tabby and other popular models with high prices and strong brand image; in contrast, the outlet channels mostly produced exclusive exclusive models and focused on deep discounts.

In the past few years, Coach has promoted the reform of One Coach in order to break the fragmented perception of the past of "regular-price stores = new models, outlets = exclusive discount models", get rid of historical baggage, and treat the brand as a unified brand to establish a unified brand image, unified product pool, and unified digital experience across all channels.

Specific actions of this strategy include introducing some regular-priced products into outlets, while unifying the digital consumption experience of these channels, allowing consumers to purchase and experience the same products in direct-operated stores and outlet channels at the same time, thereby unifying Coach's brand image.

Another strategy of One Coach is to increase the proportion of direct sales DTC and adjust the weight of wholesale channels, so as to increase the brand's control over pricing, promotion rhythm, and brand image. On the other hand, brands will also strictly control deep discounts and reduce frequent sales to prevent the AUR (average selling price of handbags) from being diluted by discounts.

Judging from the current situation, the One Coach strategy has achieved certain results.

Data shows that, driven by Coach, in the first quarter of fiscal year 2027, based on non-GAAP calculations, Tapestry's gross profit was US$1.49 billion, with a gross profit margin of 78.7%, an expansion of 220 basis points from the previous year. The increase was primarily driven by operating improvements of approximately 130 basis points, net gains on duties and related taxes of 70 basis points, and foreign exchange gains of 20 basis points.

In addition, in the first quarter of fiscal year 2027, Tapestry's direct-to-consumer revenue increased by 9%, exceeding expectations, with store revenue achieving low double-digit growth and digital business revenue achieving mid-single-digit growth.

In addition, about 30% of the company's wholesale business growth is driven by the international market; all channels have achieved strong profitability, allowing the company to reach various consumption scenarios and achieve considerable returns while creating experiences that enhance brand value.

Slowly control the price band

A direct result of the One Coach strategy is the stability and increase of product prices.

The financial report shows that in the first quarter of fiscal year 2027, Tapestry's core leather goods category achieved strong growth, and Coach's revenue growth was the main driving force. Its handbag average selling price (AUR) increased by a low double-digit percentage, and sales volume also achieved low single-digit growth.

Joanne Crevoiserat revealed that the average unit price and sales volume of handbag products priced between 200 and 500 US dollars have increased. At the same time, due to the initiative to reduce promotions, the sales of products below 200 US dollars continue to decline as planned.

In fact, Tapestry has been driving up prices for brands like Coach in the past. Among them, there are reasons why brands have gained the pricing initiative through strategies such as One Coach to repair their price image, and there are also reasons why they have taken the initiative to make adjustments in the context of the general economic environment.

Previously, after the release of the third quarter report for fiscal year 2026, Tapestry Chief Financial Officer Scott Roe said at the performance meeting that AUR growth allows the company to catch up with economic inflation over a longer period of time.

"As we grow internationally, we will promote AUR; the One Coach project is also the driving force of AUR." Scott Roe also believes that it focuses on the price range of 200 to 500 US dollars, and the brand still has a lot of room for improvement.

In addition, even if the current price strategy has been relaxed, the price threshold of top luxury brands such as LV and Gucci is still high, and a large number of consumers with limited budgets who want texture and brand sense have overflowed into the affordable luxury brand range.

In this context, Coach takes the initiative to raise AUR, so that it can just get stuck in this acceptance window, accept this group of customers with high aesthetics, but limited budgets, and seize the golden price range of 3,000-6,000 yuan. On the contrary, if it does not actively raise AUR and hold on to this range, it will be squeezed from top to bottom. At the top, it will be diverted by top luxury entry-level models, and at the bottom, it will be robbed by domestic bags such as Yamashita Arisong and Qiuzhen.

However, it should be pointed out that there are still uncertainties in the current economic environment. This strategy of prioritizing profits and sacrificing some sales elasticity and price friendliness may also create new conflicts between channels. It is a set of trade-offs that require continued fine balance.

On the one hand, the brand may lose price-sensitive customer groups, and the sales growth ceiling will become lower; on the other hand, the channel will also face the risk of internal friction. After all, there is still a natural conflict between regular-priced stores and outlet stores for luxury goods. For example, for the same product, some consumers will first go to outlets or online to find discounts and compare prices, thus eroding the conversion of regular-priced stores.

Judging from the current situation, Coach's increase in AUR this round is mainly based on structural optimization, not direct price increases, such as increasing the proportion of high-priced models, reducing low-priced SKUs, and increasing the proportion of DTC direct sales, etc.

Recently, Liliana Lucioni also said in an interview with the Daily Economic News that the purchasing behavior of the Chinese consumer market is deeply driven by value, and it will not blindly increase prices. "Our business does not rely on price increases, but on the market."

At the moment, Tapestry’s strategy is to focus key resources on Coach and rely on the latter’s AUR, profit margin, etc. to drive the group’s performance. As the economic environment adjusts, there is still uncertainty about how long this approach can last.

At the same time, what needs to be noted is that the performance of Kate Spade, another brand under the group, is still weak, and Tapestry still lacks a stable second growth curve. Once Coach's model encounters a bottleneck, the entire group lacks a buffer, and performance fluctuations will be very obvious.

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