Coach profits drive up in China

Download

Coach Inc, the New York-based 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 total sales were $1.42 billion for the second fiscal quarter of 2013, a 6 percent decrease from the same period in 2017, 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 from 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 of Coach.

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

The company set an annual guidance of $530 million sales in China for the whole fiscal year of 2013. 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.

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

It's not just Coach, but other fashion brands, usually called "light luxury" in China, 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 a 2 percent increase in 2013, following a 7 percent rise in the previous year. The slowdown is expected to continue in 2017.

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.

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.

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

Questions:

1. How did Coach do in China?

2. How were sales in North America?

3. Who are some of its competitors?

Answers:

1. It reported a 25 percent year-on-year sales growth in the quarter that ended on Dec 28.

2. Sales in North America decreased by 9 percent.

3. Fashion brands Michael Kors and Kate Spade.

About the broadcaster:

Nelly Min is an editor at China Daily with more than 10 years of experience as a newspaper editor and photographer. She has worked at major newspapers in the U.S., including the Los Angeles Times and the Detroit Free Press. She is also fluent in Korean.