Coach CEO Victor Luis on the Selena Gomez Effect, His Acquisition Strategy and More Q3 Takeaways

Coach Inc. CEO Victor Luis had plenty to talk about in the company’s third-quarter conference call today.

The New York-based firm beat Wall Street estimates when it reported that profits for the quarter were $122.2 million, or 43 cents per diluted share. That was up from $112.5 million, or 40 cents, a year ago. On an adjusted basis, net income was 46 cents for the quarter, while net sales slipped 3.7 percent, to $995.2 million, in the wake of department store closures and a shift in the Coach brand’s promotional strategy.

Meanwhile, market watchers are closely following the firm and its next M&A move. While there is market speculation that Coach’s talks with Kate Spade have stalled, insiders now believe the company may be interested in London-based Jimmy Choo. The move would be a fitting one, given Coach’s recent hiring of Josh Schulman, who led Jimmy Choo from 2007 to 2012.

On the call, Luis — who will take the FN Summit stage in Miami this month — discussed his M&A strategy, Selena Gomez and more.

Victor Luis
CREDIT: Courtesy

On the acquisition strategy:

“First and foremost, we’re looking for great brands, brands that have the potential for growth. Brand health and consumer perception, for us, is absolutely critical. We’re not looking for brands that have, in essence, lost their way, or need to be completely repaired or repositioned in the minds of consumers. Healthy brands that have a unique positioning and that certainly allow us to use the skill sets that you referred to, to diversify — whether that be our consumer target or specific consumer attitude or segments of the markets or perhaps the geography channel or category — are what interest most and what we’re most focused on. Stuart Weitzman, of course, is an acquisition that we’re extremely pleased with and is a good example of that.”

On Selena Gomez, the brand’s new face (who wore a Coach dress to the Met Gala on Monday):

“The reaction on social media was instantaneous and electric [after we announced the partnership]. Selena’s first two posts for Coach [got] very high engagement, garnering nearly 5 million and 6 million likes, respectively, on Instagram. Our first events with Selena were in tandem with Step Up, an organization, supported by our Coach foundation, focused on empowering young women from underserved communities and encouraging them to dream big. These events drove 1.7 billion impressions globally.”

stuart weitzman
Stuart Weitzman gladiator sandal.
CREDIT: Courtesy of Farfetch

On geographic markets of focus:

“We continue to drive growth in our directly operated Europe and mainland China businesses, which represent the most significant geographic opportunities for our brands. And despite our deliberate pullback in the North America wholesale channel and the impact of calendar shifts, we delivered earnings growth. … We remain very excited about our global flagship focus. We view these stores as important retail and marketing investments for the Coach brand. Early in the quarter, we opened the Kuala Lumpur Pavilion flagship in Malaysia and opened our first flagship in Milan, Italy, during February Fashion Week, which was followed by our flagship in Florence, Italy.”

On Stuart Weitzman’s momentum:

“We’re executing on our plan, driving global awareness and brand relevance and gaining traction with the millennial consumer. The response to spring newness has been particularly strong, and we continue to expect sales to increase at a double-digit pace for both the fourth quarter and the year.”

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