Retailing, Franchising, and Consumerism Business Intelligence in China

Coach To Acquire Greater China Retail Businesses From Distributor

Luxury accessories company Coach says it has signed agreements to acquire the Coach domestic retail businesses in Hong Kong, Macau and mainland China from its current distributor, the ImagineX group.

This acquisition will allow Coach to directly manage the significant growth opportunity with the Chinese consumer by gaining control of its distribution in this region. The agreements provide for 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. Under the agreement reached with Coach, ImagineX, who has acted as Coach's distributor in the region since 2003, will continue to provide support services in areas such as distribution, logistics, Human Resources, accounting, payroll and information systems following the transition. This will allow the Coach team to focus on brand-building and direct management of the front end of the retail business where it directly touches the consumer.

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 expects that this acquisition will be slightly dilutive to Coach's consolidated financial results in the near term, taking control of brand building and distribution at this critical juncture will lay the foundation for a substantial contribution of these businesses in the future.

There are currently 24 Coach domestic retail locations in these three geographies, including the new Queen's Road Central flagship and seven other stores in Hong Kong, one in Macau and 15 in mainland China. In addition, there are five travel retail locations in the region, which will continue to be managed by third-party operators and are not part of this agreement.

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