Cynthia O'Connor, ceo of Cynthia O'Connor + Co., a sales showroom that represents Kooba, Treesje, Botkier and C.C. Skye, among others, believes contemporary brands are taking a realistic pricing approach. "Two years ago, contemporary handbags were selling at $700, and $650 to $700 was a very average price to be. That's not our target anymore. We still have to offer some of those things-it just doesn't give enough depth to the collection if we don't-but we are trying to make the core lower than that."

Dean Khial, vice president of Southern California retailer Kitson, where bags average around $395, has noticed consumers expect more from their bags. "The bottom line is that the consumer wants value for the price," he says. "A lot of companies are making bags that are on the cusp of the trend for a much better price, and that has caused the majors to bring prices down. Most consumers felt they were overpaying before."

Melissa Richardson Akkaway, owner of Beckley, a boutique in West Hollywood, Calif., where Rebecca Minkoff, Lauren Merkin, and Lyla Black are the bestselling handbag brands and the average handbag price is $250, concurs. "The bag really needs to be special and on trend, and not too expensive where it's not a huge investment," she says.

The 550-square-foot shop, which is planned to open in May, will offer luxury business and travel accessories, small leather goods, footwear, outerwear, timepieces, sun wear, fragrances, and related accessories. The shop will give Coach shelf space it may desire as its department-store customers have been making sweeping inventory cuts.

Coach sees the stores "as labs where we compile an emerging men's collection and evolve our merchandising strategies," Tucci said.

Coach has a limited assortment of goods for men in its stores, which generally run about 2,500 square feet and mostly offer handbags and other fashion accessories to women.

Coach has been cutting handbag prices and introducing new styles in an effort to improve sales of shoes and accessories as consumers continue to cut spending on luxury goods. Efforts to boost its North American operations showed some success in the prior quarter. Coach also has been working with its suppliers to avoid hurting margins, as stores remain cautious about building up inventories despite signs the economy is stabilizing.

Chairman and Chief Executive Lew Frankfort on Wednesday said Coach was especially pleased with the rebound at its North American stores from the holidays, with same-store sales up 3%

"You're the fifth person to say that to me this week. And you're not wrong. The contestants keep getting bigger and bigger...As the trainers we have no say over the challenges. We worry about them too."

"I lived on junk food. I had no direction. Once I punched a hole in our wall. Another time I stole a car….[My father and I] sort of bonded over food. When he was alone with me and we had nothing to say to each other, it would be like, 'Let's eat a pizza!'"

The Daily has learned that Coach is developing a new brand around Krakoff. In fact, "Reed," "Reed Krakoff," and "RK" were registered with the United States Patent and Trademark office in February along with two designed logos. The goods and services that could potentially be launched under this trademark range from personal care products like body sprays and toilet soap to ready-to-wear and leather goods. Even pet products and "hotel and restaurant services" are accounted for.

There's some good news for shoppers amid the economic gloom: Lower clothing prices are coming soon, and not just for sale items. Mainstream brands such as Lacoste and Coach plan to cut retail prices as much as 30% on their fall offerings.

The reason: Fashion producers are trying to anticipate consumers' tighter budgets and avoid last year's drastic markdowns, which can undercut a brand's perceived strength. "The 70% discounts we saw during the holiday season are risky not just for brand integrity but brand equity," says Erwan Rambourg, luxury and sporting goods analyst at HSBC.

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For the fall, Lacoste will offer cable-knit sweaters, normally $145, for $98, says Robert Siegel, chairman and chief executive of the company. In spring 2010, Lacoste plans to lower prices in other categories, including its signature polo shirts. Price cuts do not mean a cut in quality, says Siegel. "We are taking it out of our own margins in our attempt to be more consumer-friendly."

Coach is also planning to trim profit margins, reducing its average handbag price to $300 from $335. Joe's Jeans, which sells premium denim, is dropping its entry price point to $138 from $145.

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Retailers are also trimming their sails. Instead of lowering prices on the lines they usually stock, boutiques are starting to incorporate more accessible products into their collections. Nordstrom plans to spend more inventory dollars on lower-priced merchandise.

The company said the layoffs amount to a bit more than 10% of its U.S. corporate staff of roughly 1,500. The cuts are across all levels and U.S. business units, Coach spokeswoman Andrea Shaw Resnick said. News of the job cuts was reported in Women's Wear Daily.

This is the first time Coach has reduced staff during this recession, and Ms. Resnick declined to say whether additional layoffs are planned. "There is no further detail at this time," she said. Because of a "uniquely challenging operating environment, we have taken steps to significantly reduce our expense structure," Ms. Resnick said.

Aside from the staff reductions, Coach is deferring "substantial investment" in technology projects and eliminating merit-based wage increases, the company said.

The collection is not quite a departure for the brand, but rather an extension, according to president and executive creative director Reed Krakoff. "Poppy offers a different attitude that is younger in spirit," he said. "It's playful, with more prints, interesting fabrics and more experimentation. [These ideas] are always countered with a more classic shape or a more traditional construction."

The line is cohesive but has a diverse range of items, from a tote covered in a profusion of red sequins to "Gossip Girl"-worthy tiaras to pochettes covered in strands of gold beads. There is also footwear, watches, eyewear and select apparel items such as sweaters in the collection,

Frankfort said 2008 was the "most difficult holiday season our company has experienced during my 30-year tenure," but noted that traffic to Coach's full-priced North American stores has stabilized in the weeks since the Christmas holiday.

In the fiscal second quarter, which ended on Dec. 27, sales were hurt by heavy discounts at department stores and Coach factory stores. Full-priced stores were also hurt as bargain-hunting shoppers looked elsewhere.

Second-quarter net income fell to $216.9 million, or 67 cents per share, from $252.3 million, or 69 cents per share, a year earlier.

"No social or economic class is immune from this crisis," said Lew Frankfort, chairman and chief executive of Coach Inc. "The consumer is fragile. She's worried about her future. She's worried about her security. She's visiting malls and retail stores less frequently."

And Coach, the brand that helped define the term "accessible luxury," is feeling the pinch, posting on Tuesday a 5.8 percent drop in first-quarter net income on an 11.2 percent rise in sales. It also lowered its sales forecast for the year. But Frankfort remains upbeat, believing Coach can pick up market share against key competitors as pressures mount on even more affluent consumers. "What we're banking on is that we can get a greater share of her wardrobe spend as well as a greater share of her gift spend," he said.

The firm isn't pulling back on its retail expansion or plans for its new Collections concept, nor on its earnings guidance for the full year. However, in a nod to the chaos currently running through the world of discretionary spending, Coach has reduced sales projections and, correspondingly, spending plans for this fiscal year.