Coach is a big favourite for US shoppers – but too expensive, survey concludes

US women prefer Coach’s leather handbags to those of its major rivals, but are put off by the brand’s high prices, according to a survey by JP Morgan.

According to some 500 women aged 22-55 who have purchased a handbag in the past year, Coach was selected most as “brand of choice”. However, they displayed low awareness of changes made to the product line to boost growth.

In terms of styling and quality, 72% said that Coach’s product was “unchanged”.

Meanwhile, among the women who purchased a bag in the $300-$500 price range, 72% said Coach’s offer is overpriced.

The brand was likely hurt by the shift by consumers to Factory stores during the recent downturn in search of discounts, and the company may now struggle to persuade them to pay full price, said JP Morgan analysts.

“The greatest price pushback [is] Middle America [about 80% at the $75K to $150K income level], confirming qualitative field checks that promotion is needed to spur demand,” they wrote in a note.

Coach was not the only handbag brand to be viewed negatively. Michael Kors came in below Coach with only 12% saying it was their brand of choice, compared with 21% for Coach. Some 77% said Michael Kors’ handbags were overpriced.

Just 10% of those surveyed said Kate Spade was their favourite handbag brand while 6% said Louis Vuitton was their favourite, followed by Tory Burch at 3%.

Some 47% listed an unnamed “other” as their favourite.

“The onus still remains on the bulls to disprove the structural industry bear case, despite the stocks at multiyear lows today,” said the JP Morgan note.

* JP Morgan downgraded Coach shares to neutral from overweight Monday ahead of the company releasing its results later Tuesday, “given reduced earnings and cash flow visibility” along with uncertainty across the sector”.

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