Once deemed immune to even the worst of conceivable economic situations, high-end handbag maker Coach (COH) has finally started struggling. Last quarter, same-store sales declined by 1.7% — the second time in the past three quarters that sales fell.
You can blame Michael Kors (KORS) for that. While Coach was once the top-tier name in handbags, its designs are stuck in the 90’s, and their former target demographic has largely aged themselves out of the luxury purse market. It’s a problem that can be fixed, but not quickly. It will require new looks and rebranding, which could take years.
The current yield of 2.5% isn’t apt to crumble, but with margins already being crimped as the company heads into an overhaul (two executives are leaving next month), the yield isn’t strong enough to justify riding out the looming turbulence.