Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Focusing on Asian logistics, transportation, and travel companies

Asian Equities Analyst, Logistics & Transport

July Tourism & Macro Data Suggest Coach Q1 FY17 Will Disappoint

Casino Crackdown, Cool Consumer Could Cause Cuts to Coach Consensus; Conclusion? Caution!

Thematic (Sector/Industry)

China Consumer discretionary / Thematic (Sector/Industry)

<p>This Summer we visited over a dozen premium handbag stores in New York City and Honolulu in order to better understand the issues facing Coach and its peers in the evolving luxury retail space. We learned that an apparent change in spending habits by Asian visitors to North America, combined with ongoing weakness in Japan, Hong Kong, and Macau, will likely limit <a href="https://www.smartkarma.com/entities/13644" target="_blank" data-smartkarma-citation="entities:13644:1">Coach Inc (COH US)</a> revenue growth in FY17 (June 2017) and FY18, making consensus Sales and EPS targets difficult to meet. Longer term, a growing reliance on US outlet stores and a push into smaller Tier-3 and Tier-4 cities in China may undermine the Coach brand. We believe our conclusions – mostly negative – have implications not only for Coach and its premium handbag peers, but also for any luxury retail brand that relies heavily on Asian tourism and consumption for growth.</p>

This Summer we visited over a dozen premium handbag stores in New York City and Honolulu in order to better understand the issues facing Coach and its peers in the evolving luxury retail space. We learned that an apparent change in spending habits by Asian visitors to North America, combined with ongoing weakness in Japan, Hong Kong, and Macau, will likely limit Coach Inc (COH US) revenue growth in FY17 (June 2017) and FY18, making consensus Sales and EPS targets difficult to meet. Longer term, a growing reliance on US outlet stores and a push into smaller Tier-3 and Tier-4 cities in China may undermine the Coach brand. We believe our conclusions – mostly negative – have implications not only for Coach and its premium handbag peers, but also for any luxury retail brand that relies heavily on Asian tourism and consumption for growth.

Summer (Mis-)Adventures in Luxury Retail: Why to Avoid Coach (6388:HK / COH:US) For Now