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Tag: coach

  • Global Brands to Sell US Licensing Businesses to Differential Brands

    Global Brands to Sell US Licensing Businesses to Differential Brands

    Global Brands Group is to sell a substantial part of its North American branded business to Differential Brands Group for US$1.38 billion.

    The move, announced at the release of its annual results yesterday, will allow it to cut debt, pay a modest special dividend to shareholders and free capital to grow “a more focused business”, the company said. It will also result in about half of its 7000 staff leaving the company.

    Global Brands Group is currently carrying about $1.1 billion of debt, much of it related to its 2014 spin-off from Li & Fung and subsequent listing.

    The assets to be transferred include licences for Disney, Star Wars, Calvin Klein, Under Armour, Tommy Hilfiger, Bebe, Joe’s, Buffalo David Bitton, Frye, Michael Kors, Cole Haan, Kenneth Cole and the BCBG Max Azria label which it bought last year for $27.4 million after the company filed for bankruptcy.

    CEO Bruce Rockowitz said the sale was the outcome of a strategic review of the business.

    “We concluded that divesting the portion of our business that has a high present-day value, was the way to move forward. With this transaction, the group will be able to improve our balance sheet significantly and simplify our organisation, while focusing on the less established lines of business where we see high growth potential going forward.”

    Subject to shareholder approval, the deal will see Global Brands Group become “simpler, flatter and more nimble”.

    The company said that on the branded product side, the group’s European and Asian businesses will remain as before, while its US business will now focus on footwear and its remaining fashion business. Brand Management will continue to be managed on a global basis.

    “Looking ahead, we will continue to attract new licenses to our portfolio with a tighter and deeper focus on our businesses,” said Rockowitz. “At the same time, we will continue to improve the efficiency of our existing businesses, delivering synergies across our platforms. In addition, we have embarked on a significant cost reduction program across the organisation and we are committed to improving our cash flow via a combination of tighter working capital management, and even stronger cost discipline.”

    Revenue up but write-downs cost

    For the year to March 31, Global Brands Group increased its revenue by 3.4 per cent to $4.023 billion.

    However sales were impacted by Coach taking its footwear business in-house after their licence expired in June last year, and the cessation of the Quiksilver kids fashion licence when the company declared bankruptcy.

    Total margin increased from 28.5 per cent to 31.2 per cent, however operating costs increased by 37.3 per cent to $1.254 billion, driven largely by transition costs for new licenses in men’s and women’s fashion and additional operation expenses for running the new brands.

    The group also made one-off, non-cash adjustments in relation to impairments from the write-off of a receivable arising from a loan made by the company, and various intangible assets, which totalled $94 million.

    “In addition, taking into account this strategic divestment, the external market condition and business performance, the group performed an impairment test and recognised a non-cash goodwill impairment of $1.05 billion during the financial year,” the company said. That resulted in a net loss of $887 million for the year, however earnings before interest, taxes, depreciation and amortisation was steady at $379 million.

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  • Coach boosts Tapestry’s sales results

    Coach boosts Tapestry’s sales results

    Luxury fashion giant, Tapestry, has posted solid third quarter growth, boosted by strong sales from its Coach brand.

    Tapestry posted a 33 per cent increase in net sales for the quarter ending March 31 to $1.32 billion compared to the previous corresponding period, and relatively strong results from Coach where overall sales rose six per cent.

    Same-store sales for its Kate Spade brand, however, plunged nine per cent in the quarter because of a decline in online revenue. The company also posted its Stuart Weitzman’s profit margin was hurt by production delays and weaker sales of older shoes.

    The company’s operating income for the quarter was $159 million on a reported basis, while operating margin plunged 12.0 per cent compared to the 15.2 per cent in the prior year. On a non-GAAP basis, operating income was $184 million, an increase of 14 per cent from the previous year, while operating margin was 13.9 per cent from the 16.3 per cent in last year’s third quarter.

    Victor Luis, Tapestry chief executive, said their solid third quarter performance was consistent with their expectations, as they achieved double-digit increases in sales and earnings per share.

    “Results were driven by continued growth at Coach, where comparable store sales rose, led by outperformance in North America, and reflected our strong offering, including the successful global relaunch of Signature in retail,” Luis said. “We leveraged these sales gains, tightly controlling costs, and delivered operating income growth ahead of the top line increase.”

    During the quarter, the company has completed the buybacks of the Coach business in Australia and New Zealand as well as the Stuart Weitzman business in Northern China, while also taking operational control of the Kate Spade joint ventures for Mainland China, Hong Kong, Macau and Taiwan.

    Tapestry also gave an updated guidance that offered reason for optimism about Kate Spade. It now expects that acquisition to create $45 million in synergies, up from the $30 to $35 million it outlined in previous guidance. The company has also stated it now also expects Kate Spade to contribute $145 million in operating income for the year, higher than the $130 to $140 million in earlier guidance.

    According to Neil Saunders, managing director of GlobalData Retail, the bounce in Tapestry’s results that comes from Coach where sales growth accelerated to 5.9 per cent on a total basis and three per cent on a global comparable basis is encouraging,

    “In our view, this indicates that the Coach brand continues to gain ground across the demographic spectrum,” Saunders said. “From our own brand tracking, we are particularly encouraged to see growing interest among younger consumers – something that is helping to fuel strong numbers in the e-commerce division.”

    Saunders said on the product front, they believe that the current range is compelling.

    “The recent relaunch of the Signature collection – which features an interlocking ‘C’ motif – has been particularly successful, with popular products like the Charlie Carryall tote doing well. In our opinion, the popularity of the iconic ‘C’ signature design shows how much the brand image of Coach has strengthened over the past year or so,” he said.

    He added that looking ahead, they think that the economic environment will continue to be supportive into the next quarter, as residual tax refunds and bonuses come through.

    “However, thereafter these benefits will wane, putting some downward pressure on growth,” he said. “However, as the underlying fundamentals of Coach remain strong, growth will remain good – with a possible boost in fall thanks to an expanded collaboration with Selena Gomez.”

    Overall, he said, Tapestry is currently a mixed bag of businesses.

    “However, all are headed in the right direction and this gives us confidence the group will fulfil its ambition of becoming a strong luxury lifestyle company.”

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  • Coach Singapore unveils graffiti wall at the Botanic Gardens

    Coach Singapore unveils graffiti wall at the Botanic Gardens

    Coach Singapore has unveiled a 70m print of New York street graffiti along a wall at the Botanic Gardens MRT station.

    The project was conceptualised in New York City by the US luxury brand to celebrate the symbiotic relationship between fashion and street art.

    It made its debut early this year with a series of murals across the US city put together by 13 influential street artists.

    Singapore’s version, by artists Dain and Such, plays on Coach’s monogram with an urban feel. This collaboration will lead to a special collection of ready-to-wear pieces, tote bags and small leather goods to be launched in July.

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  • Tapestry takes back Kate Spade China business

    Tapestry takes back Kate Spade China business

    Tapestry, the fashion retailer formerly known as Coach, has taken back operational control of its Kate Spade China joint ventures in Hong Kong, Macau, Taiwan and the mainland.

    CEO Victor Luis described the move as “an important business development initiative” and part of a plan by the group to assume greater direct control over its international distribution.

    The company has also entered into a purchase agreement to acquire the Stuart Weitzman business in Northern China from its distributor.

    “These transactions are in keeping with our strategic priority to maximise the opportunity with Chinese consumers globally across our brands,” said Luis.

    “In addition, we are excited to announce the buyback of the Coach business in Australia and New Zealand from our distributor, with an expected closing in the third fiscal quarter. As a result, we will be creating a Tapestry hub and center of excellence in Sydney to drive growth across our portfolio, further unlocking the value of a multi-brand operating model.”

    The news was included in the company’s second quarter results announcement in which Tapestry revealed a 35 per cent increase in sales, largely fuelled by the addition of the Kate Spade operations to its figures after its acquisition last July.

    Net sales totalled $1.79 billion for the second quarter, up from $1.32 billion in the prior year, while net income was $63 million.

    Luis said the second quarter performance exceeded the company’s expectations, with a return to growth for Coach, improved sales at Stuart Weitzman and the contribution of Kate Spade which continued to make progress after its integration into the business.

    A “significant step forward”

    Neil Saunders, MD of GlobalData Retail, said after removing the Kate Spade data from Tapestry’s comparable sales numbers, a modest growth rate of 2.2 per cent was achieved, which was still a “a significant step forward for the group”.

    “Most pleasing is the return to growth of the Coach brand which has, for some time, seen revenue slide as the result of a pullback from a number of sales channels, including department stores. The 2.2 per cent increase signals that this period of painful adjustment is mostly over and that Coach has a stable platform from which to expand. A more disciplined approach to discounting and promotions helped margins at the brand, which flowed through to some healthy gains in operating income. In short, Coach’s game plan of becoming less ubiquitous and selling more at higher price points is now delivering.”

    Saunders said Coach deserves credit for an on-trend holiday line up, a compelling marketing campaign, and great in-store execution.

    “However, we also believe that gains were aided by a confident consumer and flattered by a very soft prior year comparative. Both factors were particularly influential in the key North American market.

    This leads us to be a bit more cautious about prospects over the upcoming quarters, especially as comparatives become tougher and gifting sales are less significant.”

    But he said any softness in the North American market can be offset by a more aggressive and coordinated approach to international expansion.

    “On this front, we are encouraged that Tapestry is taking back direct control of the Coach business in Australia and New Zealand and believe that this will help to improve the brand’s presence and influence in the region.”

    Looking beyond Coach, Tapestry’s newest brand, Kate Spade performed less well. Global comparable sales declined by 7 per cent over the period, driven in part by a fall in e-commerce.

    “As much as this looks disastrous, the dip is mostly the result of a deliberate change in strategy, with Tapestry pulling back from the flash sales and heavy discounting that Kate Spade previously used to drive revenue. Predictably, this has resulted in a dramatic volume decline and waning interest among some consumer segments.

    “The intention is clear: Tapestry wants to take Kate Spade through the same process used to rebuild Coach. This is a necessary step to bolster brand value as Kate Spade had become too value-oriented and overly reliant on excessive, and margin depleting, promotions to drive results. We are conscious that weaning Kate Spade off the discounting drug will be far from easy and better numbers will only come through over the medium to longer term.”

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  • Celebrating Lunar New Year with offers from DFS

    Celebrating Lunar New Year with offers from DFS

    To celebrate Lunar New Year and the arrival of the Year of the Dog, luxury travel retailer DFS Group will offer special promotions and interactive activities at certain T Galleria and DFS stores worldwide next month.

    There will also be exclusive offers from the group’s Give Joy Together gift guide.

    In-store activities will include a Pokemon Go-inspired game featuring the DFS Lunar New Year dog character Lolo. This will be available at T Galleria by DFS, Hong Kong, Canton Road; T Galleria Beauty by DFS, Hong Kong, Causeway Bay; and T Galleria by DFS, Angkor. It will also be at outlets in Hawaii and Sydney.

    Other activities include a Fortune Tree and Wishing Tree with lucky prize envelopes, and a personalised charm giveaway set for customers taking advantage of Give Joy Together promotions.

    Exclusive products for the month include: Anne Klein Blush women’s ceramic watch with Swarovski crystals; Bulgari Serpenti Twist Your Time, with either mother-of-pearl or red dial; Emporio Armani Connected touchscreen smartwatch; Estee Lauder limited-edition Pure Color Envy Sculpting Eye Shadow & Lipstick; Hamilton’s Ventura Elvis 80 automatic men’s watch with a complimentary exclusive Elvis Presley tote bag; Marc Jacobs exclusive tote bag; Marc Tetro Hong Kong Pug cosmetic bag and Westie tote bag; Swarovski Haves bracelet, pendant and earrings; and Tiffany & Co Keys Fleur de Lis Key and Keys Petals pendants.

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  • Stuart Weitzman taps Gigi Hadid for footwear range

    Stuart Weitzman taps Gigi Hadid for footwear range

    Supermodel Gigi Hadid has partnered with Stuart Weitzman on two exclusive footwear styles for launch this fall.

    Hadid, face of the F/17 ad campaign has created the Eyelove and Eyelovemore ranges, pointed-toe mules which represent the first project for Stuart Weitzman’s new creative director Giovanni Morelli.  With hadid, he modified an existing brand silhouette to “reflect her sleek style and strong affinity for the mule”.

    Hadid says she was inspired by her personal connection to the mystical symbol the “evil eye” in creating the Eyelove, which comes in ballet suede and deep indigo suede. Reflecting her minimalistic design aesthetic, the shoes feature one “evil eye” symbol on just the right foot of each silhouette.

    The Eyelovemore, available in frosted suede, illustrates her playfulness with its bold multi-eye pattern on both shoes.

    Morelli says Hadid’s designs easily transition from season to season – the inside of each toe-box is lined with shearling. Packaged in a signature Gigi Hadid box with a matching dust bag, the shoes are available exclusively at Stuart Weitzman retail locations and global websites as well as Moda Operandi and Lane Crawford in Hong Kong, Singapore and Mainland China.

    “I’ve really been into slides lately and wanted a pair that can take me into fall… no more cold toes!,” exclaimed Hadid. “The evil eye is a powerful symbol meant to protect those who wear it from negative energies. It’s emotionally comforting and beautiful and captivating to look at. The bright colors are fun and remind me why we designed these shoes – they represent our commitment to build three additional schools with Pencils of Promise. Look Good, Do Good.”

    A short film The Season for Loving, starring Hadid, will kick off the Gigi Mule’s global retail debut on the brand’s online store. The film was directed by Cameron Duddy – a music video director who has worked with Bruno Mars and Jennifer Lopez, and bassist of country trio Midland. The film combines beautiful cinematography with edgy color treatments and strikes a perfect balance between the real and surreal – all while showcasing the shoes.

    Stuart Weitzman is part of the Tapestry Group, formerly known as Coach.

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  • Tapestry sales report

    Tapestry sales report

    The leather goods company formerly known as Coach Inc., Tapestry, has reported earnings for the first time since the name change.

    Tapestry, which is in the midst of a major rebranding, posted a 24.2 per cent increase in revenue to $1.29 billion and a net loss of $17.7 million compared with a profit of $117.4 million the previous year.

    Same store sales dropped two per cent for the Coach brand.

    Neil Saunders, managing director at GlobalData Retail, said the current period is one of transition for Tapestry, which changed its name from Coach last month as it grows into a multibrand lifestyle company following the acquisitions of accessories retailer Kate Spade and shoemaker Stuart Weitzman.

    “The inclusion of Kate Spade flatters the overall revenue number, which rose by almost 24 per cent,” Saunders said. “However, if this is excluded, a weaker picture emerges with sales down by 1.7 per cent over the prior year. This is solely the result of the continued revenue slide at Coach where overall sales dipped by 2.8 per cent, including a two per cent decline in comparables.”

    The pullback from department stores and other channels that Tapestry considers to be detrimental are part of the reason for the slide in Coach’s numbers. Saunders said this is not an unusual pattern.

    “However, we feel that there is an additional softness in this quarter’s results and that they indicate a slight worsening of performance since the prior period,” he said. “Fortunately, much of this appears to be down to transitory factors such as a shift in the Chinese Mid-Autumn festival and natural disasters in the United States. Even so, they serve as a reminder of the fickleness of demand when it comes to higher-end brands – which is why Tapestry wants to move away from being reliant on just one label.”

    Saunders said their recent store visits to Coach has led them to believe that the holiday quarter will be a positive one.

    “The collection is looking strong with some good gifting stories; merchandising is compelling and engaging,” he said. “Our consumer data also indicates that perceptions of Coach continue to rise and its status as a brand that people want to receive and to gift have both improved since last year.”

    Tapestry’s newest addition, Kate Spade, also suffered a sales decline, with comparables down by 9 per cent.

    “While this is a less than auspicious start, it is the result of deliberate action by Tapestry to wean the brand off its reliance on discounting and flash sales,” Saunders said. “Predictably, this had a negative impact on volumes, especially online where global e-commerce declined by 600 basis points.”

    As much as this is beneficial to gross margins, the shift put severe pressure on the bottom line.

    “Thanks to this, and the disruption and expense of the acquisition, Kate Spade fell firmly into the red,” Saunders said. “However, we are not overly concerned by this as we believe Kate Spade needs to take two steps back before it can move forward.”

    With Tapestry’s two leading brands in negative sales territory, it fell to Stuart Weitzman to try and make up some lost ground. The division duly delivered with a 10.2 per cent uplift in sales. Better collections in store coupled with improved demand for footwear drove the results.

    “We are confident that this uptick will continue into the holiday quarter and beyond, bolstered by the much-awaited collection from Giovanni Morelli,” Saunders said.

    According to Saunders, as important as the performance of the individual brands is, it is the way in which Tapestry will bring them together that will determine business performance. “Here, despite the negative revenue growth and this quarter’s net loss of $17.7 million, we are encouraged by the progress,” he said. “Synergy savings from the Kate Spade integration are ahead of schedule, which allowed the company to beat its earnings forecast. Moreover, Tapestry has increased its targeted savings out to 2019 from $50 million to $115 million.”

    Saunders added that all of this suggests that the current period is one of transition for Tapestry and that better numbers will come through over time.

    “Overall, we have confidence in the general direction and strategy of the group.”

  • Coach parent to delist in Hong Kong Exchange

    Coach parent to delist in Hong Kong Exchange

    Coach parent Tapestry says it will delist from the Hong Kong stock exchange. Tapestry this week replaced the Coach name on the exchange’s ticker. It said it was withdrawing from local listing because of low volumes in trading of its shares and that it would now focus on its primary listing in New York.

    Bloomberg reports that a lack of interest from investors in the former British colony is common to most of the companies that have a so-called secondary listing in Hong Kong, including Fast Retailing, the Japanese parent of Uniqlo and GU.

    “It is difficult to see what benefits the secondary listings in Hong Kong have brought these companies,” Robert Cleaver, a corporate lawyer at Linklaters LLP, told Bloomberg. “Trading tends to gravitate to the market where the most liquidity is, which is typically where the primary listing is.”

  • Coach Vietnam to have its first store

    Coach Vietnam to have its first store

    The first Coach Vietnam store is soon to open in Ho Chi Minh City.

    The American leather-goods brand will make its market debut in the Saigon Center next month, with the store already under construction.

    The first store is set in the concept of ‘Modern Luxury’, and will sell all latest items and collections from the brand, including Coach x Selena Gomez.

    Coach Vietnam is operated by Maison Group, which also distributes other brands such as Christian Louboutin, Karen Miller, Mango, MaxMara and Topshop.

  • Luxury retailer Coach rebrands to ‘Tapestry’

    Luxury retailer Coach rebrands to ‘Tapestry’

    To better incorporate all of the brands it now owns, luxury goods company Coach of New York is changing its name to Tapestry.

    The company that came to prominence in the Mad Men era now owns brands like Stuart Weitzman and Kate Spade & Co as well.

    Chief executive Victor Luis said on Wednesday the name Tapestry is more inclusive.

    Coach acquired Stuart Weitzman in 2015 in a deal valued up to US$574 million. It spent US$2.4 billion for Kate Spade this year, seeking to broaden its appeal.

    The Coach brand of bags and other goods is alive and well, but it becomes one of three brands sold by the company that will be called Tapestry.

    “Three years ago we laid out our vision to transform Coach and announced our intention to grow beyond the Coach brand,” said Victor Luis, CEO of the luxury firm in a statement.

    “Through the execution of our strategic plan and with the acquisitions of Stuart Weitzman in 2015 and Kate Spade & Company just this summer, we have realised these goals.

    “We are now at a defining moment in our corporate reinvention, having evolved from a mono-brand specialty retailer to a true house of emotional, desirable brands, all leveraging our strong operational foundation.”

    Luis said each of brand under the new Tapestry label has a unique proposition and fulfils “different fashion sensibilities and emotional needs within the very attractive and growing $80 billion global market” for premium handbag and accessories, footwear and outerwear.

    “In Tapestry, we found a name that speaks to creativity, craftsmanship, authenticity and inclusivity on a shared platform and values.

    “As such, we believe that Tapestry can grow with our portfolio and with our current brands as they extend into new categories and markets.

    “Most importantly, we are establishing a strong and distinct corporate identity, which enables our brands to express their individual personalities and unique language to consumers.”

    A website with the new name, which becomes official at the end of the month, is up and running.

    The change is part of Coach’s pursuit of younger shoppers who may not feel the same draw to store windows on Manhattan’s 5th Avenue.

    Coach began as a small workshop in Manhattan in 1941, and became a fashion powerhouse in the early 1960s though innovate designs.

    Coach Inc will also be changing its ticker symbol on the New York Stock Exchange from “COH” to “TPR”.

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  • Sunglass Hut Opens New Store In Hangzhou

    Sunglass Hut Opens New Store In Hangzhou

    International sunglasses retailer Sunglass Hut opened a new store in Hangzhou’s Intime Wulin store, which is the brand’s third store in the city following the ones in Hangzhou Kerry Centre and Hangzhou Bailian Outlets.

    Sunglass Hut has reached cooperation with many first-tier brands, including Ray-Ban, Prada, Dolce & Gabbana, Burberry, Tiffany & Co., and Coach.

    It started as a small independent store in Miami in 1971 and it developed 100 chain stores in Miami by 1986, reaching annual sales of USD24 million. By 1991, Sunglass Hut’s annual sales exceeded USD100 million and by 1996, the company seized 30% share of the American sunglasses market.

    By the end of 2016, Sunglass Hut already opened 3,269 retail stores in 28 countries and regions around the world, including 3,104 retail stores in North America, Asia Pacific, Europe, South Africa, and Latin America; and 165 authorized retail stores in Middle East and India.

    For the Greater China region, Sunglass Hut had nearly 40 retail stores, including 13 in Hong Kong, seven in Shanghai, and three in Beijing.

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  • Subway theme for Coach Hong Kong pop-up

    Subway theme for Coach Hong Kong pop-up

    A pop-up shop designed like a New York subway car has been launched by luxury brand Coach Hong Kong at Lane Crawford in IFC, Central.

    As well as showcasing Coach’s latest collections, the Art of Expression pop-up shop offers customisation of leather bags for customers.

    Running until August 22, the rose gold pop-up shop pays homage to the home of Coach, New York City, and features graffiti and music to match. The life-size subway recreation also includes a mosaic wall ideal for selfies, which can be pimped in an interactive photo booth by adding Coach stickers, graffiti and other effects before being emailed.

    Inside the subway car, Coach showcases its pre-fall and fall collections for women and men, including floral print dresses and skirts reminiscent of the ’30s, embellished t-shirts and high-top trainers with NASA details.

    A Coach craftsman is available to add the brand’s signature leather Tea Roses to iconic Dinkys, personalise leather bags and wallets with a monogram or Coach stamp, or add a new glove-tanned leather strap of choice to bags.

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  • Closing shop on China’s e-commerce platforms

    Closing shop on China’s e-commerce platforms

    The closures of a number of retail and luxury brand giants on China’s e-commerce platforms indicate that retail competition is no less fierce online than offline.

    It is old news that the Chinese market is highly competitive and unlike any other market in the world. What may sell on the high street in London is not guaranteed to sell in China. The rainbow-lensed promises of e-commerce seem to be an easy way to access China’s 770.4 million working population, 0.2 per cent or over 1.5 million of which have an average income of US$500,000.

    Political concerns and falling sales: Lotte

    In 2015, Lotte Group Retail opened a Tmall store, hoping to widen its reach in China, where over 60 per cent of its overseas stores are located. The large South Korean multinational conglomerate has had a presence in China for over 20 years, with 115 supermarkets and five shopping malls.

    But on January 12 this year, Lotte closed its Tmall store – along with three brick-and-mortar stores in Beijing – after rising political tension between China and South Korea. In December, Lotte’s China headquarters admitted that the company was facing investigations for tax, fire control and safety issues. However, the closure of its Tmall store seems to have stemmed also from the fact that China is Lotte’s only international market where growth is stymying. Sales fell during the last three months of 2016, year-on-year.

    While Lotte remains in the market through its physical shopping malls and supermarkets, and on the JD.com website, the company has not announced whether it will be reopening its Tmall store at any future date.

    Heavy local competition: Asos

    Asos, the UK’s largest online fashion retailer, entered China in 2013 with high expectations. The company announced it was investing RMB 100 million (US$14.5 million) towards the market, importing British styles and developing a sales force. Its business model relied exclusively on e-commerce, with its own website, as well as a Tmall store.

    However, Asos failed to attract enough customers and was running a loss of GBP 4 million (US$5 million) by April of 2016, when it announced that it was shutting down its China operations.

    Asos faced a number of problems in the Chinese market, from operations to marketing. When it first started, the company encountered issues with shipping though China Post, with customers paying import taxes on clothes. Eventually, Asos obtained a local warehouse, but then it encountered complex clothing trade regulations in China, particularly in regards to correct labelling. As a result, Asos had to spend additional funds on restitching to comply with local code, contributing to higher than expected start-up costs.

    Effective marketing was also a major issue for Asos, with the company failing to distinguish itself from local, more affordable brands. While it may be a major player in the US and Europe, Asos was relatively unknown to Chinese millennials, its target consumer base.

    Tmall concerns for luxury brands: Coach

    Coach was one of the first US luxury handbag brands to launch a Tmall store, creating a pop-up store from December 2011 to January 2012, and then an official one in 2015. However, citing a shifting operational strategy, Coach announced that it was leaving the platform just one year later in September 2016.

    China is a critical market for luxury goods, as sales in the US and Europe steadily decline. Many brands see e-commerce as a way to directly access customers and receive greater exposure, which is why many have moved onto online platforms en masse. Despite this, online platforms have always been a concern for luxury brands, who fear appearing too mass market. Moreover, Alibaba has been criticised by brands for not doing enough to remove fake goods, despite a counterfeit removal program. In 2016, Gucci and Michael Kors quit the anti-counterfeit coalition as protest against the program’s inefficacy.

    Coach still remains in the Chinese market through its WeChat account, an avenue that is growing in popularity amongst luxury brands. Cartier, Longchamp, and Montblanc all have WeChat shops with WePay functions. Some companies believe that WeChat offers a more personalised shopping experience, as well as greater control over its brand.

    For many luxury brands, online platforms are more for marketing and building brand image, rather than sales. However, official Tmall flagship stores do not receive priority listing on searches. In fact, according to a 2016 study by L2, only 12 per cent of first page Tmall search results were through the official Coach shop. The only luxury brands that controlled more than 80 per cent of first page search results were Ports 1961, Burberry, Tommy Hilfiger, Calvin Klein, and Tumi.

    Key Takeaways

    E-commerce is a high-growth sector, with online retail sales totaling US$581.61 billion in 2015, and it is estimated to grow 20 per cent annually by 2020. China is now the biggest online retail market in the world, and Chinese consumers make up almost half of all online sales globally.

    Companies looking to take advantage of China’s market size and sell to Chinese consumers often mistakenly believe that e-commerce offers a shortcut to success. While a misconception, this idea is understandable. There are fewer licensing requirements to operate through e-commerce, and customs clearance is faster.

    However, as has been demonstrated through high-profile store closures in 2016, e-commerce requires extensive pre-entry knowledge of current regulations, a realistic logistics plan, and a local marketing strategy. Those who enter the market blindly do so at the risk of expensive learning curves and wasted efforts.

    • This article was first published on dezshira.com.  Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll, and audit matters. For inquiries, email [email protected].
  • Sales up, revenue down for Michael Kors Holdings

    Sales up, revenue down for Michael Kors Holdings

    While retail net sales grew 9.2 per cent to US$836.7 million for luxury lifestyle brand Michael Kors in its third quarter, ended December 31, its revenue decreased 3.2 per cent to $1.35 billion.

    It sales growth was mainly driven by 193 store openings since the end of the third quarter, including 143 stores associated with the company acquiring its the previously licensed outlets in Greater China and South Korea. This resulted in licensing revenue dropping 22.9 per cent to $43 million, but revenue in Asia growing 89.1 per cent to $112.3 million.

    At the end of December, the company had 816 retail stores, including concessions, compared to 623 at the same time the previous year. There were also 128 retail outlets run by licensing partners.

    Chairman/CEO John Idol says the company believes Asia represents a $1 billion opportunity over the long term.
    For the first nine months ended December 31, the company saw retail net sales increase 9.6 per cent to $2 billion while comparable store sales fell 6.6 per cent. Wholesale net sales dropped 15 per cent to $1.32 billion. Gross profit eased 2.8 per cent to $2.04 billion.

    “More work to do”

    Neil Saunders, MD of research company GlobalData Retail, says the poor holiday quarter shows that Michael Kors has a lot more work to do before it is back on track.

    “The numbers provide a marked contrast to those of Coach, a company going through a similar brand reinvention, which had a much more positive third quarter. To be fair, the overall decline is partly because of the decision to cut back on distribution through department stores and other channels, which Michael Kors believes have been undermining its brand through excessive discounting, ” says Saunders.

    While the resulting 17.8 per cent slide in wholesale revenues and 22.9 per cent drop in licensing revenues was painful. “We believe the decision to dial back is a necessary step in making the brand less ubiquitous, and driving higher margins.

    “However, the issue is that the reduction in the number of doors through which Michael Kors is available is not immediately translating into an uplift in sales through its own stores. With a 9.2 per cent rise in retail sales, the numbers look robust enough, but most of this is down to store openings and the shops acquired in Asia where Michael Kors bought out the brand licence.”

    Saunders says the underlying comparable sales tell a more revealing story. “These remain weak and have actually deteriorated since the previous quarter. Only a small element of this decline is because of the stronger dollar; indeed, on a constant currency basis same-store sales are still down by 6.4 per cent.

    “As much as we believe that Michael Kors is headed in the right direction, and that its new lines are generating interest, it has much more work to do in reconnecting with customers who have been alienated by the overexpansion of the brand. As yet, it is simply not exciting customers in the same way that Coach or Kate Spade are. ”

    Saunders says that reconnecting customers with the brand is particularly important as Michael Kors expands its range.

    “The new Access smartwatches and fitness trackers, and the new fragrance lines are sensible additions to the portfolio. However, they will only really drive sales as part of a strong lifestyle brand that consumers want to buy into. In our opinion, on this front Michael Kors has more convincing to do. ”

  • Growth for Coach China

    Growth for Coach China

    New York design house Coach reports “notable strength” in Mainland China while reporting its second-quarter results for the quarter ended December 31.

    Coach China sales were roughly even but increased 6 per cent on a constant currency basis when the impact of the strong US dollar was removed. In addition, there was a “significant” improvement in the quarter for Hong Kong and Macau.

    “We are both pleased and proud of our performance this holiday season, particularly in light of the challenging and volatile global retail environment,” says CEO Victor Luis, noting that China represents “significant opportunities” for its brands.

    “And, despite our deliberate pullback in the North America wholesale channel as well as currency headwinds, we delivered double-digit earnings growth in the quarter. ”

    Second-quarter net sales totalled $1.32 billion for the second fiscal quarter, an increase of 4 per cent over the same period the previous year, including a benefit of 40 basis points related to currency translation.

    Gross profit totalled $906 million, up 5 per cent. Gross margin for the quarter was 68.6 per cent compared to 67.4 per cent in the year-ago period, while net income for the quarter was $200 million.

    Net sales for the Coach brand totalled $1.20 billion for the quarter, an increase of about 2 per cent. This included international sales of $440 million, up 3 per cent.

    Continued strength

    This growth was driven in part by positive comparable-store sales overall with continued strength in Mainland China.

    In Japan, sales rose 9 per cent in dollar value, but eased 2 per cent in constant currency, impacted by a lower Chinese tourist spend.

    Sales eased for the group’s other directly-run businesses in Asia.

    Gross profit for the Coach brand rose 4 per cent to $830 million. Gross margin for the quarter was 69 per cent, including about 30 basis points of benefit from currency. This compared to 67.7 per cent for the quarter in the previous year.

    Net sales for the group’s Stuart Weitzman brand reached $118 million for the quarter compared to $94 million in the same period the previous year. This 26 per cent improvement was driven by strong growth in the brand’s direct channels, and was positively impacted by a wholesale shipment timing shift from the first quarter.

    Gross profit for Stuart Weitzman rose 26 per cent to $76 million, while gross margin was even at 64.3 per cent.