Like many other sectors on Wall Street, retail is keeping its eyes peeled for specific details on a Republican-proposed border tax that would increase fees on goods retailers plan to import and sell from other countries.
For luxury retailers like Coach, who has a global presence and outsources its material internationally, it's hard to foresee the exact consequences from a border tax without specific guidelines.
"It all depends what the taxes are and whether the cost of goods includes the raw materials or not as an example," Coach CEO Victor Luis told CNBC's "Closing Bell" on Tuesday. "Our handbags are made in 18 countries across the world with a concentration in Asia. We're very dependent on leather, and approximately 50 percent or over 50 percent of our hides come from the U.S., so is that considered a border tax? There's a lot of variables."
Luis said 40 percent of Coach's revenues are garnered outside of the U.S and nearly 7,000 of its 15,000 employees are located internationally.
And since the United States in general heavily consumes imports, Luis said he believes "any" border tax could lead to higher prices.
"If we see this border adjustment in an economy where 70 percent of GDP is driven by consumption that is driven on imports, any border tax will lead to higher prices for the consumer," Luis said. "That's just a reality that we'll have to face if it comes to that."
Unlike other retailers like Under Armour or department stores, Coach reported a beat on earnings and revenue for its fourth quarter, with earnings of 75 cents per share on revenue of $1.322 billion while analysts expected earnings of 74 cents per share on revenue of $1.318 billion, according to Thomson Reuters consensus estimates.
Combined with a successful quarter and a "very high gross margin," Luis said he believes the company doesn't fall in immediate danger of raising prices.
"The performance comes in spite of the very intentional pullback that we have had in the department store channel where there is increasing competition and [it is] increasingly promotional," Luis said. "We have a very high gross margin. We're not in a category that is perhaps a bit more restrained in passing on prices to consumers. That is an advantage that we have here."