• Anne-Marie Earl

Coach Announces Deal to Acquire Kate Spade

Will Coach's positioning on wholesale channels affect independent retailers?

kate spade coach

May 8, 2017 - The luxury handbag maker Coach has announced a deal to acquire its smaller rival Kate Spade & Co. for $2.4 billion, in an effort to appeal to the Millennial consumer. The deal is expected to close at the end of the third quarter of 2017.

"Kate Spade has a truly unique and differentiated brand positioning with a broad lifestyle assortment and strong awareness among consumers, especially millennials," Victor Luis, the CEO of Coach, said in a press release. "Through this acquisition, we will create the first New York-based house of modern luxury lifestyle brands, defined by authentic, distinctive products and fashion innovation."

Shares of Kate Spade closed more than 8 percent higher Monday following this announcement, while Coach's stock ended the day up almost 5 percent. As of Monday's close, shares of Coach have risen 12 percent over the past 12 months and are up 27 percent for the year-to-date period. Kate Spade shares are down more than 22 percent over the past year, and down more than 1 percent for the year-to-date period. Both boards unanimously voted in favor of the acquisition.

Retailers will want to take note of Coach’s positioning on online and wholesale channels that make up a large portion of Kate Spade’s sales, as many small retailers stock Kate Spade products from stationery to home décor to fashion accessories, showing a high demand with the Millennial consumer.

Coach CEO Victor Luis said Kate Spade would be afforded the autonomy to make its own design and marketing decisions, though he admitted the company had become "too dependent" on online sales and wholesale distribution. Those channels "can lead to meaningful brand deterioration over time," and Coach will cut back on both, Luis said.

Anne Marie EarlAnne-Marie Earl | Managing Editor

Anne-Marie covers news and trends related to the home, tabletop, bath & body and gourmet categories of the gift industry and serves as managing editor for both print and digital publications.

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