NEW YORK (
) -- The appreciation of China's yuan will no doubt be a blow to U.S. retailers that manufacturer merchandise in the country, especially as
sourcing costs emerge as a growing concern for the sector
. But several companies are actually poised to benefit from a stronger yuan.
On Monday, the Chinese government said it is looking into easing restrictions on its tightly controlled currency. This, in theory, should of course give Chinese shoppers more purchasing power and directly benefit those retailers with stores in the country.
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, for one, has a substantial business in China, currently operating in 300 cities, and with plans to have a presence in 500 cities.
The athletic footwear and apparel maker is aiming to grow its revenue by 40% over the next five years, which it hopes to do in part from adding new customers in China. Nike is scheduled to release its quarterly earnings after the market closes on Wednesday, and investors are waiting to hear if management provides any color on its Chinese business.
Handbag and accessories retailer
is currently eying China as its primary source of growth. The company currently has 37 stores in the country, but
CEO Lew Frankfort told TheStreet in an interview
earlier in the year that China could support at least 150 locations.
How Retailers Will Go On After the Yuan
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China was the sources of an upside surprise in Coach's last two quarters, which Frankfort attributes to the brand's loyal following in the country. The growing Chinese middle class, which may soon have more money to spend, can't afford high-end luxury brands, also making Coach an attractive alternative.
Wall Street Strategies analyst Brian Sozzi estimates that Coach is positioned to grow its sales in China to $250 million annually by the end of 2011, up from $50 million in 2009. "The company's merchandise fetches higher prices in China relative to the U.S., and the brand is still a small percentage of the luxury goods market, suggesting margin killing saturation is not lingering on the horizon," he said.
Other apparel players like
Polo Ralph Lauren
also have a presence in the country, along with high-end jeweler
Fast-food restaurant chains like
are also poised to benefit from a stronger yuan.
Yum has about 3,500 KFC, Pizza Hut and other chains in China, with plans to add 96 new locations this year. The company also saw about 30% of its revenue come out of the country in the first quarter.
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-- Reported by Jeanine Poggi in New York.
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