The couple strolling arm in arm into Coach's flagship Madison Avenue store on a winter evening has Lew Frankfort perplexed. He cocks his balding head, like a dog confused by a high-pitched noise. Theirs is just the sort of out-of-kilter pairing that stumps him: It strains the boundaries of his obsessive research into customer behavior and messes with his gut, which he considers pretty damned golden when it comes to knowing who will make a purchase and who will walk out empty-handed. But these are turbulent times in the land of retail, and even Frankfort, 62, the C.E.O. who transformed New York-based Coach from a stolid purveyor of leather goods into one of the hottest companies and highest-earning brands of the past decade, is aware that the rules are changing—and not entirely in his favor. Frankfort has spent 25 years building Coach, but in the past four months, he's watched the stock lose nearly half its value. That's why he's here on a chilly December evening, deep in the retail trenches, trying to peer into his customers' blessedly acquisitive souls, which right now means gauging what might happen with the couple that just walked in. (View slideshow.)

The man is tall and Midwestern-beefy, about 45, with scraggly hair beneath a navy baseball cap and no jacket over his polo shirt, despite the December winds. The woman is blond and leggy, her hair a bit too "done" for New York, her coat a Marc Jacobs from a few seasons ago. "Atlanta, maybe?" Frankfort says, struggling to nail their demographic.

He tracks them stealthily as they meander through both levels of the airy 10,000-square-foot boutique—the highest-grossing of the company's 277 U.S. locations—examining a $400 green leather hobo bag, a pair of ballet flats made of Coach logo fabric, a scarf in a jaunty pastel plaid. "They'll do it," Frankfort says. But his voice, a Bronx growl, is less confident than usual.

Five minutes later, the couple leaves empty-handed. Frankfort is deep in conversation with the store manager, inquiring about the day's receipts, but his eyes dart after them. "They didn't do it," he says to no one in particular as he watches the heavy doors close behind them. "Why didn't they do it?"

To be fair, Frankfort isn't the only person asking this $64,000 question; these are truly unhappy days for high-end retailers. With the subprime-mortgage crisis spreading into the general credit markets and consumer confidence foundering, investors are running terrified. Luxury retail and apparel stocks have been among the hardest hit, and forecasts for the rest of the year remain glum. "I doubt we've seen the bottom yet," says Dana Telsey, a onetime top-ranked analyst at Bear Stearns who now runs her own retail-consulting firm.