Coach to replace Estée Lauder with Interparfums in new perfume deal

April 9, 2015, 11:55 AM UTC
Summer Party On The Highline, Presented By Coach
NEW YORK, NY - JUNE 11: A view of atmosphere at Summer Party on The Highline, presented by Coach at High Line Park on June 11, 2013 in New York City. (Photo by Brian Ach/Getty Images for COACH)
Photograph by Brian Ach — Getty Images

Coach (COH) is switching partners as it looks to build up its still small fragrance business.

The New York-based leather goods maker and fashion house said on Thursday it had signed an 11-year exclusive license agreement with Paris-based Interparfums, the maker of fragrances for luxury brands such as Dunhill, Jimmy Choo and Oscar de la Renta, opting not to renew a deal with current partner Estée Lauder Companies (EL) that ends in June.

Coach CEO Victor Luis said Interparfums had the wherewithal to help the company turn its fragrance business into “a much larger opportunity.”

“Given Interparfums’s successful track record of cultivating and growing fragrance lines for fashion and luxury goods brands they were the ideal choice to take our business to the next level,” said Luis.

The agreement calls for Interparfums to create, manufacture and distribute new perfumes and fragrance-related products for both men and women. These fragrances will be distributed around the world to department and specialty stores and duty free shops, as well as at Coach’s own stores starting the fall of 2016.

While Coach doesn’t break out its fragrance sales, its perfume business is accounted for in a group of non-core products that includes watches and glasses, which collectively generate 8% of sales. In March 2007, Coach launched its first fragrance in partnership with Beauty Bank, a division of Estée Lauder, Inc. The two companies then signed a five-year agreement in 2010.

While Coach did not say which it was switching away from Estée Lauder, it may have something to do with some of the other brands for which it makes fragrances: Estée Lauder holds the fragrance licenses for names that includes Coach arch-rivals Michael Kors (KORS) and Tory Burch.

Coach’s move comes as the company looks to halt a dramatic decline in North American sales in the last two years as its handbags fell out of fashion. As detailed in an interview with Fortune last year, Luis is looking to heal Coach’s image by closing 20% of mall stores to focus on flagships, making the company less reliant on discounting at its factory outlet stores, and showcasing its higher end assortment more aggressively.

There are signs his strategy is working: Coach’s higher end bags did well in the most recent quarter, and comparable sales at stores that have been renovated grew. Wall Street seems to have regained faith in Coach: shares are up 30% over their 52-week low.