China, here comes Coach crusade
American luxury brand Coach expects to have about 100 stores on the mainland next year, as it steps up efforts to turn the world's second-largest economy into its biggest market after the United States over the next few years.
The New York-based maker of luxury bags and accessories was set to ramp up its marketing initiative across China today with its listing on the Hong Kong stock exchange - the first company incorporated in the US to do so.
Lew Frankfort, chairman and chief executive at Coach, said on Monday that the listing would 'raise awareness of the Coach brand among investors and consumers in the China market, as well as throughout Asia'.
The company's primary listing will continue to be in New York. There was neither additional common stock issued nor capital raised through its Hong Kong listing.
It joined European luxury brand Prada, which is based in Milan, with a dual listing in Hong Kong.
'We believe that China will surpass Japan as our No 2 market within the next few years,' Frankfort said. 'This year we estimate that [sales to] Chinese consumers, both in and outside China, will approach 8 to 10 per cent of our overall sales. We do believe that over the next three to five years, that will grow to 20 per cent.'
The company has forecast its sales on the mainland, Hong Kong, Macau and Taiwan to reach at least US$300 million in its current fiscal year to June, up from its previous guidance of US$250 million.
Coach recently reported worldwide sales of US$1.05 billion for its fiscal first quarter that ended on October 1, compared with US$912 million in the previous fiscal year.
Frankfort said new store openings would continue to drive growth in the Chinese market this fiscal year. 'We are opening stores rapidly,' he said. 'This year, about half our sales come from Hong Kong and the other half from the mainland.'
Coach plans to open 30 new stores in the 12 months to June. It opened four new locations on the mainland and one in Macau in the quarter to October 1, which brought its tally to 71 total stores in China.
The firm recently announced the acquisition from a distributor of its domestic retail business in Taiwan, a transition that is expected to be completed early next month. It has 24 locations in Taiwan, which generates about US$50 million in retail sales.
Frankfort said Coach aimed to launch about 30 stores annually over the next several years, the vast majority of which would be on the mainland and would consist of stores for both men and women.
He pointed out that many of the more than 100 cities on the mainland with a population of more than one million 'can each support two to four [Coach] stores'.
'What we find most wonderful is the very high repurchase trend in China,' he said. The company's recent survey on the mainland showed that '92 per cent of Chinese consumers who [have] owned a Coach product expressed a positive intention to repurchase', he said.
'We have never reached that level in Japan or in the United States,' Frankfort said.
Despite fears of an economic slowdown on the mainland, Frankfort indicated that Coach remained confident about its China strategy.
'Through the first three weeks of November, our business continues to be very strong,' he said. 'We're enjoying an excellent holiday season. No slowdown. We're on track to deliver excellent results this quarter in China.'
