LTD CEO: Coach ‘Cut Own Throat’ With Discount Stores-COH

A scolding after a dismal second quarter earnings performance

By Editor , Business Insider

The CEO of Victoria’s Secret parent L Brands (LTD) blasted Coach (COH) for seeking “easy money” by becoming a discount outlet, the Wall Street Journal reports

“Coach became a discount outlet,” L Brands CEO Les Wexner said at an analyst meeting in New York. “They cut their own throat. The outlet business is easy money, [but] discounting yourself is the beginning of the end. I can’t find the exception. It’s hard to have a dual identity. Outlet doesn’t build a brand. We don’t milk it.”

Coach’s net income dropped a staggering 12% in the second quarter as the luxury handbag maker faces intense competition from Michael Kors (KORS), Kate Spade and Tory Burch.

Coach’s outlet stores have grown to 60% of its retail sales in North America from about 30% in 2006, The Journal reported in July. The outlets have become more profitable for the brand than its full-price stores, bringing in about $600 more in sales per square foot.

Wexner said Wednesday that L Brands is moving Victoria’s Secret in the opposite direction with plans to close one of the lingerie brand’s four outlet locations.

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