Coach to Acquire Asian Retail Businesses

New York City Coach Inc. said Thursday that it will acquire its domestic retail businesses in Hong Kong, Macau and Mainland China from its current distributor, the ImagineX Group. Besides giving Coach control of its distribution in this region, the company said that the acquisition will enable it to directly manage a significant growth opportunity among Chinese consumers.

There will be a phased buyout of the current Coach retail businesses in Hong Kong, Macau and China over the next year. Thibault Villet, Coach’s president, Greater China, will lead the operations of these businesses.

Coach will acquire the assets, including fixtures and inventory, of its current stores in the region in stages over the next year. While the company said it expects that this acquisition may affect its consolidated financial results in the near term, taking control of brand-building and distribution will lay the foundation for a substantial contribution of these businesses in the future.

“ImagineX Group has been instrumental in the initial development of the Coach brand in this region, including the opening of several important locations in key retail venues in Hong Kong, Beijing and Shanghai,” said Lew Frankfort, chairman and CEO of Coach. “Under Villet’s leadership, we’re building an on-the-ground team and deepening our insights into the Chinese consumer. This experience, together with our capital strength and international brand recognition, provides a solid foundation for Coach’s expansion in the Chinese market.”

This announcement is strengthened by the company’s new 9,400-sq.-ft. global flagship store, which is located on Queen’s Road Central, Hong Kong’s prestigious Central shopping district. The new store opened Wednesday, according to Frankfort.

There are currently 24 Coach domestic retail locations in these three geographies, including the new flagship and seven other stores in Hong Kong, one in Macau and 15 in Mainland China. There are five travel retail locations in the region. These are managed by third-party operators and are not part of this agreement.

More locations are on the way. “Over the next five years, we expect to open over 50 new locations, aggressively growing our sales and market share in this rapidly expanding region,” said Ian Bickley, president of International for Coach. “Our goal is to be one of the top three imported handbag and accessory brands, with sales of over $250 million and a market share of at least 10% by fiscal 2013, up from only about $30 million and 3% today. With the investments we will make in stores, marketing, organization and infrastructure, we’re poised to replicate our success formula in Japan since taking control of the business there in 2001.”