Coach readies for boost from Chinese New Year
With luxury spending in China booming, the handbag maker has high hopes for the longest and most important holiday of the year.
Aspirational luxury retailer Coach (COH) may get a solid lift in sales as Chinese New Year, or Lunar New Year, approaches. China is the largest market for Coach outside the U.S., and with Chinese luxury spending expected to increase significantly in the week leading to Jan. 23, Coach may well witness its first 2012 bonanza.
Coach is the leading American marketer of luxury lifestyle handbags and other fashion accessories and competes with premium apparel and accessories players like Ralph Lauren (RL), Liz Claiborne (LIZ) and Ann (ANN).
Contrary to the weak macro-economic conditions in the U.S. and Europe, the Chinese economy is still growing at a brisk pace. Despite fears that the Chinese economy would hard land in order to curb surging inflation, Chinese GDP growth rate stood at 8.9% -- well above market expectations.
This uptrend is also being felt in luxury spending. While it was initially predicted that luxury retailers operating in China might be in for tough days, last quarter's results for retailers like Coach and Ralph Lauren were well above market expectations, gaining primarily from the increase in their Chinese business.
Among all international markets, China remains the single most important market for Coach's future growth. In fact, the company had itself listed on the Hong Kong stock exchange on Dec. 1. Additionally, Coach announced the opening of 30 new stores in China for fiscal 2012.
Chinese New Year is the longest and most important festivity in the Chinese calendar. Additionally, the custom of gift giving on New Year's eve is much more profound in China than in the U.S. or Europe, which should also contribute to an increase in sales during this quarter. We believe with Coach's growing brand identity in China and the surging luxury spending around Chinese New Year, the company could be a major winner this holiday season.
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