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Coach's Handbag Sales Continue to Slide

Newly appointed Creative Director Stuart Vevers has his work cut out for him.

"Transformation" was the buzzword du jour on Coach's third quarter earnings call Tuesday morning — that metamorphosis referring to the sales turnaround and image revamp that the brand is hoping to pull off when Creative Director Stuart Vevers's first collection hits stores in September.

Despite positive editorial reviews of Vevers's collection at fashion week in February, consumer sentiment toward the brand hasn't changed yet. North American sales for declined 18 percent this quarter, down from $792 million to $648 million, a disappointing performance that CEO Victor Luis says had a lot to do with a decline in its women's bag and accessories business.

Although the company has not done any consumer testing on Vevers's designs, sales trends in the category provide some indication that he is taking the brand in the right direction. According to Luis, leather goods have been outstripping logo-laden accessories in the North American women's category. Vevers is already designing in that direction; the bags he showed in February have nary a Coach "C" in sight. 

The brand saw relative strength in its "elevated product" in retail stores (that's product above a $400 price point), which accounts for a growing percentage of sales. Its footwear division is also showing solid growth in its first year, Luis says, as are its men's and international businesses.

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Over the course of the next few months, Coach is going to be hard at work ramping up marketing to communicate to consumers its brand spankin' new (cool, fashionable, accessibly luxe) brand identity. With the help of interior designer William Sofield, the brand is giving its Rodeo Drive and Time Warner stores a newly "residential" feel this fall, with more revamped locations to come in 2015. The brand will be sharing more concrete details on the nature of its "transformation" in June.

Vevers has got his work cut out for him, given that the very category he was hired to revive is tanking. If Coach wants an underdog story, it's got one.