Best in Class: Coach's Price is Right

NEW YORK (TheStreet) -- Lowering prices is a risky feat for any luxury retailer. Shoppers love discounts, especially in lean times; the market, though, fears the dilution of the brand. But recently Coach(COH) is seemingly proving that a shrewdly managed company can successfully appease both sides.

For Coach, the critical step in that turn was made a year ago by CEO Lew Frankfort, who chose to lower entry-level price points by 15%, a move that helped the company effectively manage the economic downturn.

Coach's newer Poppy line is targeting frugal consumers.

But let's be clear about one thing: Coach isn't calling this a sale. Frankfort -- in an exclusive interview with TheStreet this past week, was adamant about this; Coach never has sales. There are no blaring signs in store windows drawing attention to these lower prices, no advertisements highlighting value merchandise. Instead, Coach's plan has been for consumers to get a pleasant surprise when they pick up a bag they expect to be $500 and it is only $200.

This Poppy line, which features handbags ranging from about $200 to $300, received an overwhelming reception and provided a much needed boost during the holiday season. In fact, Coach's second-quarter 3.2% gain in North America same-store sales (its first positive comparable sales number in over a year) is attributable, in large part, to the Poppy line.

"Coach has one of the best management teams out there," Needham analyst Christine Chen says. "They reacted appropriately to the environment without tarnishing the brand."