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Coach to Buy Retail Business From Distributor

U.S. handbag maker Coach on Wednesday said it will acquire its own domestic retail businesses in Hong Kong, Macau and mainland China from its current distributor, the ImagineX group.

Chiaki Tsukumo

The move will allow the luxury accessories maker to capitalize on the significant growth opportunity it sees among Chinese consumers.

New York-based Coach did not announce a value for the deal but did say it expects the deal to be slightly dilutive to its results in the near term.

Coach said it will acquire the assets, including fixtures and inventory, of its current stores in the region in stages over the next year. It also plans to open more than 50 new locations in the region, over the next five years.

The company said it expects the China, Hong Kong and Macau premium handbag and accessories market will more than double by 2013, to above $2.5 billion.

Coach is aiming to be one of the top three imported handbag and accessory brands in the region by 2013. It is targeting annual sales of $250 million, up from current annual sales of about $30 million.

"Our capital strength and international brand recognition, provide a solid foundation for Coach's expansion in the Chinese market," Chief Executive Lew Frankfort said in a statement.

ImagineX, which has acted as Coach's distributor in the region since 2003, will continue to provide support services to Coach following the transition.

Coach said this will help it focus on brand-building and direct management of the retail business, where it directly touches the consumer.

Last year, Coach announced plans to open about 40 North American stores, with at least six U.S. factory outlets and 15 to 20 locations in Japan, and expand certain existing stores. Coach also said it planned to open about 30 international wholesale locations, including at least five in China.

Shares of Coach closed up $1.27, or 3.7 percent, at $35.63 Wednesday on the New York Stock Exchange.