NEW YORK — Coach Inc. has added the last piece of the puzzle.
This story first appeared in the April 24, 2012 issue of WWD. Subscribe Today.
The handbag and accessories maker has reached an agreement with its South Korean distributor, Shinsegae International, to buy back its retail business in the country, marking the completion of a slew of buyback deals in Asia.
“The buyback is part of a deliberate and well-thought-out strategy. It is the last of the key Asian markets that we are going to be operating directly,” said Ian Bickley, president of Coach International, who explained that such transactions give Coach the power to continue its rapid expansion in the region.
The New York-based firm has closed deals to buy back its distribution in Japan in 2001, China in 2008 and Singapore and Taiwan in 2011. The South Korea deal will take effect on Aug. 1, just after the brand closes its buyback agreement in Malaysia in July.
“With the investments Coach is making in stores, marketing, organization and infrastructure, we’re poised to replicate our success formula implemented in other directly managed markets over the last decade,” Bickley noted.
In recent years, South Korea has become one of Coach’s fastest-growing markets in Asia. The brand, which reeled in revenues of $4.16 billion in fiscal 2011, said annual sales in South Korea are about $120 million, including global travel retail. This amounts to about 5 percent of the estimated $2.4 billion premium bag and accessories market, Coach said.
The South Korean domestic retail business that is being acquired represents about half of Coach’s brand sales in the market, or about $60 million, across 47 domestic doors. The deal does not include Coach’s 14 duty free locations in the region. Those stores will continue to be managed by other third-party operators.
Typically, when Coach enters an international market, it does so through third-party distributors. The strategy allows the brand to build a base and a following in the new market. With strong, established roots in Asia, Coach has focused on buying back its retail business in order to accelerate its growth while strengthening distribution, merchandising and in-store customer experience.
“We’ve had a model of very successfully building our business through local partners, and there are still many markets where we have local partners,” said Bickley, who noted that he doesn’t foresee similar buyback deals in other markets coming down the pipeline anytime soon.
“Our continuing strong international results reflect the enthusiasm that consumers worldwide have toward Coach’s broad and modern product offering and innovative, relevant lifestyle collections,” he said, adding that the South Korea deal “demonstrates” the brand’s “significant growth potential” and “reinforces” its commitment to expand its presence in Asia.