Coach shifts base due to high cost of Chinese tanning

The American Coach Group, which is known for its leather products, is planning to gradually shift its production base from China to India, Vietnam and other places. The cost of leather manufacturing in China is getting higher and higher, and Coach has no intention of doing this.

At the same time, Coach's sales in China have been increasing year by year. As the income of the residents of the country is getting higher and higher, the number of people buying Coach, a symbol of status and wealth, has also increased. Last year, Coach's sales in China almost doubled. It's no wonder that Coach founder Lew Frankfort named China as the company's "fastest growing industry."

Recently, according to Coach’s financial report, the profit growth rate in the second quarter of last year was higher than the expected 26%, and sales increased by about 19%. At the same time, Coach said that in the coming years, it expects profits and sales to increase by at least 10%, and by June 30, 2013, it will repurchase the company’s share worth US$1.5 billion.

In the three months prior to January 2011, the company’s net income increased from the previous 241 million US dollars, each share price of 0.75 US dollars, to 303.4 million US dollars, each share price of 1 US dollar. Speaking of American customers, Frankfort spoke during a visit: "Before the recession, they would overdraft and buy." About 5% to 10% overdraft.

Frankfort revealed that Coach will continue to expand its sales on the Internet: In the United States, online shopping is the company's fastest growing channel. In the United States, store sales (including online shopping) increased by 17% in the second quarter.

In the last quarter of last year, the company’s gross profit remained at 72.4%, which did not meet Wall Street expectations. A company spokesperson said that although the store sales volume is more optimistic, the adjustment of the product price is relatively cheap. In response to the financial crisis, Coach has reduced the company’s average handbag price by about 10%.

As of the last quarter of 2010, the company had 347 stores and 129 factory stores in South America; in Japan, the number of Coach stores reached 171; China had 52. Direct store sales increased by about 17% in the final quarter to $1.1 billion.

In a recent report, Coach also announced that it intends to repurchase its $1.5 billion stake in the company. This target will likely be completed by June 30, 2013, and will require approximately $35 million in share buybacks.

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