Coach prof­its drive up in China

China Daily (Canada) - - BUSINESS - By WANG WEN wang­wen@chi­nadaily.com.cn

Coach Inc, the New York­based fash­ion brand, ex­pe­ri­enced a 25 per­cent year-on-year sales growth in China in the quar­ter that ended on Dec 28, while its sales in North Amer­ica de­creased by 9 per­cent.

The brand’s tot a l sales were $ 1.42 bil­lion for the se­cond fis­cal quar­ter of 2013, a 6 per­cent de­crease com­pared with the same pe­riod in 2012, ac­cord­ing to Coach’s earn­ing re­ports re­leased on Wed­nes­day.

For the six months that ended on Dec 28, Coach’s net sales were $2.57 bil­lion, 4 per­cent down com­pared with the first six months of fis­cal 2013, ac­cord­ing to the re­port.

The sales drop was at­trib­uted to weak­ness in the North Amer­i­can mar­ket.

“We con­tinue to be dis­ap­pointed by our per­for­mance in North Amer­ica, which was af­fected by sub­stan­tially lower traf­fic in our stores and by our de­ci­sion to limit ac­cess to our e-fac­tory flash sales site,” said Vic­tor Luis, chief ex­ec­u­tive of­fi­cer of Coach.

But the China mar­ket’s re­sult is con­sid­ered sat­is­fy­ing be­cause com­pa­ra­ble store sales rose at a dou­ble-digit rate dur­ing the pe­riod, said Luis.

The com­pany set an an­nual guid­ance of $530 mil­lion sales in China in the whole fis­cal year of 2013. The busi­ness looked to be on track to meet that tar­get, it said in the an­nounce­ment.

China’s sales growth in the se­cond fis­cal quar­ter of 2013 also pushed its in­ter­na­tional sales up 2 per­cent to $425 mil­lion.

As an af­ford­able fash­ion brand, Coach is pop­u­lar among Chi­nese lux­ury cus­tomers, who contributed to the brand’s sales growth, some ex­perts said.

“The sales of Coach will con­tinue go­ing up in China, af­ter Chi­nese buy­ers re­al­ize it is only a fash­ion brand rather than lux­ury,” said Zhou Ting, di­rec­tor of the For­tune Char­ac­ter Re­search Cen­ter.

It’s not just Coach but some other fash­ion brands, which are usu­ally called “light lux­ury” in China, that are also get­ting busi­ness op­por­tu­ni­ties in re­cent years, while the lux­ury mar­ket growth is slow­ing down, she said.

Sta­tis­tics from Bain & Co show that the an­nual growth of China’s lux­ury mar­ket is ex­pected to show only 2 per­cent in­crease in 2013, fol­low­ing a 7 per­cent rise in the pre­vi­ous year. The slow­down is ex­pected to con­tinue in 2014.

The pro­duc­tion lines of lux­ury brands are get­ting po­lar­ized, the US-based con­sult­ing firm said in its re­port on China’s lux­ury mar­ket. Twenty-five per­cent of lux­ury bags in China were priced be­low 5,000 yuan ($826), while 33 per­cent of them cost more than 20,000 yuan.

“Some cus­tomers of lux­ury goods turned to fash­ion brands with lower prices, while many opted for fash­ion brands that are well-known and af­ford­able,” Zhou said.

An­other sig­nif­i­cant rea­son for the in­crease in Coach’s sales in China was that the brand di­ver­si­fied its prod­ucts in the na­tion’s mar­ket, Zhou added.

How­ever, Coach will not en­joy China’s mar­ket ex­clu­sively in the long term be­cause other in­ter­na­tional fash­ion brands are also ex­plor­ing it, busi­ness in­sid­ers said.

“What hap­pened in the US mar­ket also will oc­cur in China in the fu­ture,” Zhou said.

Such fash­ion brands as Michael Kors and Kate Spade present strong com­pe­ti­tion to Coach. Most of their prices and tar­get cus­tomers over­lap, she said.

PRO­VIDED TO CHINA DAILY

Cus­tomers line up to en­ter a Coach Inc store in Tian­jin. De­spite a re­ported 9 per­cent sales slump in North Amer­ica, China’s mar­ket re­mains a bright spot for the New York-based fash­ion brand.

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