Coach takes long-term view in China

14 March 2013

BEIJING: Coach, the luxury goods firm, is benefiting from pursuing a multichannel approach and tapping lower tier cities in China, where sales are rising rapidly.

Speaking on a conference call with analysts, Victor Luis, Coach's chief executive, reported that the firm had experienced growth of 40% in China during the last quarter.

It is also on target to yield revenues of $400m in the world's most populous nation during its current fiscal year, compared with the $300m or so it generated over the previous 12 months.

"We begin to see many signs that points to a very positive direction for us. Of course the most important being that our products continue to resonate," said Luis.

"We have a tremendous amount of confidence of course in the longer-term macroeconomic environment," he added. "There are a lot of macro trends that give us a tremendous amount of confidence."

Among the major shifts supporting this opinion are rising affluence among consumers, as well as the heightened emphasis by the Chinese authorities on boosting household spending.

"We see a middle class that continues to grow, we see government policy very much favouring domestic led consumption, and we know that consumption is still today at approximately 35% of China's GDP, which relative to the US, where we are today, I believe, north of 70%," said Luis.

More specifically, tapping second and third tier cities, where the number of department stores and luxury shopping malls are increasingly at a fast pace, is likely to prove beneficial.

"Today, [there are] approximately 210 cities with a population of one million or more, growing to over 230 by 2017, which is very much in line with again government policy towards urbanization."

Coach has recently also introduced an ecommerce site in China, reflecting the surge in internet usage. "Distribution continues to be very attractive and very much favouring our multi-channel rollout," Luis said.

Alongside its sales prospects, China also provides a distribution centre for other Asian markets, and a shared services centre for accounting, logistics and other support functions.

Data sourced from Seeking Alpha; additional content by Warc staff