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Wealthy Chinese men could help save Coach from its North American competitors

July 30, 2013
Obsession
How We Buy
July 30, 2013

Coach quarterly revenue June

The numbers: Not great. The American luxury leather goods maker reported revenues of $1.22 billion for the quarter ended June 29, an increase of 5.8% from the same period a year before. However, net income was down 12% on weak sales in North America. As of July 30, two of the company’s executives as well as Coach’s head designer have announced their departures. Shares fell almost 5% in premarket trading.

The takeaway:  Analysts have been watching to see whether Coach’s efforts to overhaul its image as a luxury accessories retailer to become a “head to toe” lifestyle brand is working—especially in North America. Competition from growing brands likes Michael Kors, Tory Burch and Kate Spade have some estimating that Coach may lose its almost 30% market share of the North American handbags and accessories market. Coach has begun selling footwear, clothes and jewelry, but the strategy doesn’t seem to be working yet. Sales at Coach’s North American stores open for a year or more were 1.7% lower than a year before.

What’s interesting: Demand in Asia, especially in the luxury men’s sector, is helping Coach. Total sales grew 35% in China, where men make up as much as 55% of the luxury market. Last year, the company doubled annual revenues from its men’s lines to $400 million, and it expects to hit $600 million this year.

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