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Coach Inc IS ITS ADVANTAGE IN LUXURY HANDBAGS SUSTAINABLE

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Coach Inc IS ITS ADVANTAGE IN LUXURY HANDBAGS SUSTAINABLE

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    1. Coach Inc IS ITS ADVANTAGE IN LUXURY HANDBAGS SUSTAINABLE? CEO- Rahmenta Bernard Board Members- Dan McGovern, Anthony Ayala, Mike Pierre-Louis

    3. Strategic Objectives To offer premium lifestyle accessories and provide consumers with fresh, relevant and innovative products that are extremely well made, and sold at an attractive price. Build market share in the rapidly growing North American women’s accessories market by leveraging our leadership position as a preferred brand for both self purchases and gifts. Drive growth by expanding our distribution to reach local consumers in emerging markets such as Japan To deliver a consistent message each time the consumer comes in contact with the Coach brand, through our communications and visual merchandising.

    4. Strategic Objectives To continue to ensure that the Coach brand remains distinctive and easily recognizable To implement the use of Multi-Channel International Distribution. The Direct-to-Consumer channel provides us with immediate, controlled access to consumers through Coach-owned stores in North America and Japan, the Internet and the Coach catalog, while the Indirect channel provides us with access to consumers via U.S. and international wholesale locations. To satisfy consumer orientation and anticipate consumer changing needs through the use of extensive consumer research Increase global distribution, with an emphasis on direct retail distribution in North America and Japan,

    5. Strategic Objectives To rapidly grow the North American retail store base by adding stores within existing markets, opening stores in new markets in the U.S. and by accelerating store openings in Canada. Continue to focus on improving the rate of profitability Deliver superior returns on investments by leveraging expenses To continue to use direct marketing to attract new customers through the use of email and catalogs.

    6. Financial Objectives Sales of about 3.18 billion for 2008 which will be driven be distribution growth and productivity gains. An increase of 22% from 2007 A continuation of about 20% growth in the premium handbag and accessory category in North America We plan to add 40 retail stores in North America in each of the next several years. We believe that North America can support about 500 retail stores in total, including up to 20 in Canada Expand market share with the Japanese consumer, driving growth in Japan primarily by adding about 15 - 20 new locations and expanding existing locations. We believe that Japan can support about 180 locations in total.

    7. Financial Objectives Raise brand awareness in emerging markets to build the foundation for substantial sales in the future by opening about 30 net new locations, through distributors, in Greater China, Southeast Asia and the Middle East. This includes at least five more locations in major cities in mainland China bringing the total number of locations in mainland China to at least 16. To achieve at least 10% comparable store sales gains in both the North American retail and factory channels. Pretax income dollar growth of about 26% above 2007’s

    8. PPR Group- Gucci Group Mission Statement (PPR Group) To achieve profitable growth, while pursuing international expansion in a spirit of achievement and creativity.

    9. Strategic Objectives To continue to strengthen its leadership as a global luxury brand by reinforcing its positioning in historical and new markets and focusing on its core businesses Take advantage of emerging markets such as China, India, New Delhi and Bangalore and to continue to develop an integrated distribution network with a well-conceived geographical basis. Ensure revenue growth and profitability for the Group, and to assign a specific role to each brand within the Group, so as to maintain the consistency of their positioning in terms of market segments and product categories.

    10. Strategic Objectives Remain exclusive; Gucci products are sold exclusively through a network of directly operated stores, or under exclusive Gucci franchises and in carefully selected department stores and specialty stores around the world Make all products in Italy (except for watches which are made in Switzerland) Continue to provide outstanding product quality Maintaining creativity by employing the most talented and world renowned creative directors

    11. Financial objectives By 2012 Gucci wants to double revenue and rebuild its brand's gross margin to nearly 70%. Gucci Group plans to multiply its presence in the emerging market of India by 2010. By the end of 2008 there will be four stores and in three years they plan to double that number. For the next three years Gucci wants to have 10% compound revenue growth each year.

    12. SWOT Analysis STRENGTHS: matching key luxury rivals on high quality leather and innovative styling beating competitors price by 50% or more high level of customer service monthly introductions of fresh new handbag designs strategic alliances to bring Coach brand of handbags into luxury categories such as: watches, footwear, glasses, fragrances outerwear, and mens outsourcing to cut cost and maintain low price channels of retail distribution from full-priced store, factory outlet, internet and catalogs

    13. SWOT Analysis WEAKNESSES: factory outlet stores outperforming full-priced store diluting brand with increased growth of factory outlet stores men’s accessories only account for 2% of sales outerwear only accounting for 2% of sales luggage only accounting for 1% of sales

    14. SWOT Analysis OPPORTUNITIES: growing demand of luxury goods in emerging global markets, such as China and India increased wealth of consumers in global markets of Asia, Middle East, Australia, and Mexico

    15. SWOT Analysis THREATS: French and Italian designer brands such as Gucci, Prada, Louis Vuitton, Dolce & Gabanna, and Ferragamo Brand diffusion: Manufactures of the finest luxury goods launching diffusion lines to exploit middle-income consumers. For example, Dolce & Gabanna launching “D&G”, a sub brand sold at modest price points. Counterfeiting of luxury merchandise, totaling $500 billion worth of goods sold in countries throughout the world in 2006.

    16. Ratio Analysis Profitability Ratios - Gross Profit - Net Profit Liquidity Ratios - Current Ratio - Quick Ratio Leverage Ratios - Total Debt/ Total Asset - Total Debt/ Total Equity of Shareholders Activity Ratios - Inventory Ratio - Sales/ Total Asset

    17. Profitability Ratios Gross Profit Margin= Sales – COGS Sales $2,111,501,000 - $472,622,000 = .776 $2,111,501,000 Shows the percentage of revenues available to cover operating expenses and yield a profit. Higher is better; industry average is .494

    18. Profitability Ratios Net Profit Margin= Profits After Taxes Sales $494,277,000 = .234 $2,111,501,000 Shows the after tax profits per dollar of sales. Higher is better; industry average is .119

    19. Liquidity Ratios Current Ratio= Current Assets Current Liabilities $974,482,000= 2.85 $341,824,000 This shows Coach’s ability to pay current liabilities using assets that can be converted to cash in the near future. The higher the better, Coach falls short of the retail industry average of 3.0

    20. Liquidity Ratios Quick Ratio= Current Assets – Inventory Current Liabilities $974,482,000 – $233,494,000 = 2.17 $341,824,000 Shows a firms ability to pay current liabilities without relying on the sales of its inventories. Higher is better, however Coach does not match the industry average of 2.2

    21. Leverage Ratios Debt to Asset Ratio = Total Debt Total Asset $437,786,000 = .269 $1,626,520,000 Indicates the amount of debt relative to assets; lower is better.

    22. Leverage Ratios Debt to Equity Ratio = Total Debt Total Stockholders Equity $437,786,000 = .368 $1,188,734,000 Should be less than 1; lower is better, the industry average is .08

    23. Activity Ratios Inventory Ratio= Inventory COGS/ 365 $233,494,000 = 180.32 $472,622,000/ 365 Measures inventory management efficiency. Lower is usually better.

    24. Activity Ratios Inventory Turnover Ratio= COGS Inventory $472,622,000 = 2.02 $233,494,000 Indicates number of inventory turnovers per year; higher is better. Coach Inc falls below the industry average of 4.0

    25. Activity Ratios Sales/ Total Asset Ratio= Sales Total Assets $2,111,501,000 = 1.298 $1,626,520,000 Shows a firms sales relative to its assets. Higher is better.

    26. Recommendations Keeping inline with the company’s mission statement of seeking to be the leading brand of quality lifestyle accessories offering classic, modern American styling Increase the amount of weak sale’s revenues of mens’ accessories, outerwear and luggage by at least 5% each, to total 7%, 7% and 6% respectively to compete with rivals containing a larger market share of these products Open 30 new full-priced stores a year, and open 3-5 factory-outlet stores a year to increase expansion, retain status of premium goods and prevent brand dilution. Continue to produce top quality luxury goods difficult of counterfeiting

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