Coach Announces Deal to Acquire Kate Spade
May 10, 2017,
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.
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.
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