) the leading American designer and marketer of luxury lifestyle
handbags and other fashion accessories is planning to shift nearly
half of its manufacturing out of China in order to avoid increasing
labor cost. The widely recognized 'affordable luxury' brand
competes with other premium apparel and accessories players
like Polo Ralph Lauren's (NYSE:RL), Liz Claiborne (NYSE:LIZ)
and AnnTaylor (
Even as Coach expands sales in China, it can no longer afford
the high labor costs in a highly competitive world. With Coach
planning to cut production in China to 40-50% from 85% at present
and open new factories in countries where wages are lower like
Vietnam, Philippines and India, it could lead to significant
increase in the firm's capital expenditure.
We currently forecast Coach's capital expenditure to decrease as
a % of its sales in the future as its store openings slow down due
to market saturation. However, shifting production capabilities to
new regions could lead to higher than expected CapEx for the firm
leading to potential downside to our
$57.49 Trefis price estimate for Coach
, about 4% below the market price.
You can drag the trend lines above to see the impact of
various capex scenarios on our estimated price Coach's
See our full analysis for Coach.