The devil wears...Coach?

Spotted on the Upper East Side: You may not have Birkin money, but you can still have Birkin aspirations. Apparently, a $300 Coach bag is doing a pretty good job of scratching that designer itch.

While some of luxury’s biggest names are struggling to keep shoppers interested, Coach and Ralph Lauren are having a moment. Both brands helped their companies raise annual forecasts yesterday, suggesting consumers still like nice things—they’re just choosier about which ones deserve their money.

Coach’s sales jumped 16% last quarter, according to parent company Tapestry’s earnings report, while Ralph Lauren’s revenue climbed 9%. Meanwhile, LVMH’s fashion and leather goods division, home to ultra-luxury houses like Louis Vuitton and Dior, recently reported a 5% decline in organic sales, while at Kering, Gucci’s comparable revenue slipped 6%.

Perhaps the designer hierarchy is getting a makeover—one where spending on the level of a VVVIP has a little less appeal.

The return of the It bag

One decided difference between luxury fashion’s winners and losers: their cost of entry. While lines like Louis Vuitton, Gucci, Saint Laurent, and more focus exclusively on the highest of high-end goods, down the market, Coach and Ralph Lauren start at significantly lower price points.

But fashion’s victors may have something else in common besides good earnings: They know how to make yesterday’s trends feel like tomorrow’s must-haves. Coach has embraced nostalgic handbags, including its archival-inspired Tabby, while Ralph Lauren’s polo shirts, cable-knit sweaters, and preppy aesthetic fit neatly into fashion’s renewed obsession—thanks in part to Love Story—with so-called quiet luxury, old-money style.

That appeal is reaching younger wallets. Coach attracted 2.1 million new customers last quarter, with Gen Z accounting for 35% of them. Ralph Lauren also cited growing engagement with younger consumers alongside strong demand in North America and China.

Money can’t buy taste

For years, luxury houses made exclusivity part of the price tag. But even the Birkin VIP club isn’t quite as untouchable as it once was. According to Reuters, a coveted Birkin 25 now fetches 1.7 times its retail price on the resale market, down from 2.6 times at its 2022 peak. While that doesn’t mean shoppers are trading their Birkins for Coach bags, it does suggest that scarcity alone isn’t the flex it used to be.

The real heel turn? Coach and Ralph Lauren aren’t winning by going cheaper. Coach’s average handbag selling price rose by a low double-digit percentage last quarter, while Ralph Lauren’s average retail price climbed 9%. Both also improved their profit margins.

In an economy where shoppers have vastly different budgets, the luxury industry’s next winners may be determined less by who can charge the most and more by who can make customers feel a splurge is worth it.

For investors, Coach’s comeback shows that even ultra-high-end brands can’t count on their reputations forever. Winning the next generation of shoppers could matter more than preserving yesterday’s pecking order. And Wall Street knows popularity pays.—HC