Bloomberg News

Coach to Increase China Stores by 40% Next Year to Boost Sales

November 30, 2011

Nov. 30 (Bloomberg) -- Coach Inc., the largest U.S. luxury handbag maker, plans to increase the number of stores in China 40 percent next year as it taps rising demand in the world’s fastest-growing major economy.

The luxury products maker, which has also applied to list depositary receipts in Hong Kong, plans to add 30 outlets in mainland China in 2012, Chief Executive Officer Lew Frankfort told reporters in Hong Kong today. The New York-based company is adding 20 this year to bring the total to 75, he said.

Coach aims to double China’s revenue contribution to 20 percent in three to five years from the current 10 percent, Frankfort said. Sales of luxury goods in China may rise 18 percent a year to 180 billion yuan ($28 billion) between 2010 and 2015, according to estimates by consultant McKinsey & Co.

China is the “largest geographic opportunity” for Coach, Frankfort said. The world’s most populous nation will overtake Japan as the company’s second-biggest market in “the next few years,” he said.

Same-store sales growth in China can be sustained at 10 percent or more, Frankfort said. Same-store or comparable sales strip out the effect of shops open less than a year.

Retail sales in China have grown an average of 17 percent in the first ten months of this year, according to data compiled by Bloomberg. In Hong Kong, Chinese visitors buying shoes, watches and jewelry have driven monthly retail sales to record highs.

Coach fell 3.1 percent to $60.20 in New York yesterday, paring its gain this year to 8.8 percent.

Sales in Japan comprised 18 percent of Coach’s revenue of $4.2 billion in the year ended July 2, compared with 20 percent from the country in the previous 12-month period, according to data compiled by Bloomberg.

Coach’s comparable sales in China grew at a “double- digit” rate in percentage terms in the three months ended Oct. 1, the company said last month.

--Editors: Subramaniam Sharma, Dave McCombs

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Stephanie Wong at swong139@bloomberg.net


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