Coach Says It’s in China’s Middle-Class Sweet Spot

(Bloomberg) -- The owner of Coach says its strong sales in China aren’t under threat from President Xi Jinping’s push to narrow his country’s wealth gap because the brand’s customers are mainly middle class. 

“We do think we’re at an advantaged position with the policies,” said Joanne Crevoiserat, the chief executive officer of Coach’s parent, Tapestry Inc. “We see further strengthening of the middle class.” She said the handbag company has targeted middle-class consumers with its prices since it entered the Chinese market more than two decades ago. 

Investors and analysts have been worried about whether Xi’s “common prosperity” policies will slow the pace of sales of high-end handbags and other accessories in China, a crucial market for U.S. and European luxury brands.

Tapestry said on Thursday that sales increased more than 25% in China in its fiscal first quarter compared to a year earlier and by approximately 65% versus pre-pandemic levels. The growth is noteworthy after “all the recently discussed challenges and speaks to the company’s longstanding foundation and brand equity built in the region,” BMO Capital Markets analyst Simeon Siegel said in an email.

Shares of the New York-based company jumped 10% at 1:23 p.m., the biggest intraday gain since April 2020.

Overall, luxury sales have slowed in China this year. It’s hard to discern, though, whether that’s a consequence of Xi’s new policies or the result of restrictions following the re-emergence of Covid-19 in some parts of the country, according to Claudia d’Arpizio, who recently co-authored a report on the luxury industry for Bain & Co. 

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