Coach (NYSE:COH) announced the opening of its first official online store in China for one month on Taobao Mall (coach.tmall.com), in celebration of Coach’s 70th anniversary.  Taobao Mall is China’s largest business-to-consumer (B2C) online market place by transaction value. We believe the move is a smart one and reflects Coach’s growing ambitions and popularity in the Chinese luxury market. Coach is the leading American marketer of luxury lifestyle handbags and other fashion accessories and competes with premium apparel and accessories players like Polo Ralph Lauren’s (NYSE:RL), Liz Claiborne (NYSE:LIZ) and AnnTaylor (NYSE:ANN).
We have a price estimate of $68.20 for Coach stock, which is roughly 10% ahead the current market price.
The move reflects Coach’s increasing focus on Chinese luxury market:
Undeterred by the Chinese economic slowdown to curtail growing inflation, China continues to be the most important international market for Coach. Just two weeks ago Coach announced plans to increase the number of stores in China by 40 percent next year to tap the growth in one of the world’s fastest growing luxury-market. The focus on China has paid dividends to Coach in the past too, with Chinese business contributing heavily in the company’s success for the last two quarters.
The move to open its first online store in China is behind Coach’s aim to tap into the rapidly growing Chinese e-commerce user base. As summed up by Jonathan Seliger, President and Chief Executive Officer, Coach China:
The new store will help us increase our understanding of the needs and preferences of China’s online shoppers, helping us accumulate valuable experience in China’s e-commerce landscape and gaining insights to potentially pave the way for the development and launch of a permanent online Coach store in China.
We believe that the online store will help Coach in not just cementing its already strong brand identity in China, but will also help the company to increase its margins, as e-commerce business carries significantly higher margins compared to that in retail business.Notes: