New York-based Coach Inc currently has over 70 shops in the PRC, and is targeting some 30 new venues in the world’s most populous country by mid-2012. Photo: Coach
SOMETIMES A REFINED, elite nonchalant mien, despite being oftentimes unnoticed at first, leaves the most indelible and favorable impression.
If that is the case, then New York-based Coach Inc (US: COH, HK: 6388) has nothing to worry about.
It began selling shares in Hong Kong on Thursday to a decidedly muted reception, choosing to make its capital market presence known via a somewhat rarely seen method of “listing via introduction,” a strategy that involves the issuer selling no new shares or raising new funds.
In this case, the Hong Kong depositary receipts (HDRs) which debuted in the Special Administrative Region each represent one tenth of a common stock share of the US-listed firm.
It thus becomes the first US-incorporated enterprise to hang its shingle on the Hong Kong bourse, with Prada SpA – which raised some 2.1 bln usd in June – becoming the first Italian-incorporated firm to do so in Hong Kong.
Coach’s HDR closed at 48.50 hkd on their opening day, slightly lower than their common-share cousins back in New York.
The handbag specialist couldn’t blame the market that day for the tepid response, as the benchmark Hang Seng Index surged a whopping 5.6% on Thursday and its Italian rival Prada did even better, seeing its Hong Kong-listed shares surge ahead nearly 7% on the same day.
However, when the dust had settled, the market was a bit friendlier, with Coach’s HDR’s rising 2.1% on Friday to close at 49.50 hkd.
Bagging China: Some of Coach's offerings. Photos: Coach
In addition to Prada, jeweler Chow Tai Fook is also set to go public in Hong Kong in the largest expected IPO of the year for the bourse, with both firms firmly focused on Mainland China for the bulk of their sales growth.
Mainland China is expected to constitute a fifth of the world’s total luxury market in just four short years, with sales of handbags, jewelry, watches and other pricey items to leap to some 27 bln usd by 2015 in the PRC from around 10 bln now, said market research consultancy McKinsey & Co in a recent survey.
New York-based Coach said it currently has over 70 shops in the PRC, and is targeting some 30 new venues in the world’s most populous country by mid-2012.
“This will raise awareness of the Coach brand among investors and consumers in the China market, as well as throughout Asia. We believe that China will surpass Japan as our No. 2 market within the next few years,” said Coach’s Chairman and CEO Lew Frankfort prior to the HDR deal.
“This year we estimate that revenue from Chinese consumers, both in and outside China, will approach 8-10% of our overall sales. We do believe that over the next three to five years, that will grow to 20%."
Other major names that have used Coach’s HDR method in Hong Kong of late have been Brazilian mining giant Vale and Japanese financial group powerhouse SBI.
It remains to be seen if Mainland China will have the same voracious appetite for Coach’s luxury, high-end leather handbags as it does for the high-quality iron ore that Vale supplies.
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