Two handbag titans are tying the corporate knot: Coach is shelling out $2.4 billion to purchase Kate Spade, as part of an ongoing effort to make itself more luxe. Fancy, but accessibly fancy.
That’s according to the Associated Press. Specifically, the company is paying $18.50 per share. Coach CEO Victor Luis credited Kate Spade’s “strong awareness among consumers, especially millennials” in the announcement. Millennials! Millennials! Millennials! Every brand wants to know how to get some of that limited millennial disposable income.
The broader context, here, is that handbag sales have lately been lackluster. Back in 2015, the Wall Street Journal reported that growth in sales of premium handbags and other accessories had dropped for several years running, naming Coach specifically as one of the brands challenged by the trend. In April 2016, Fortune reported that the company was getting a better handle on its business by re-upscaling; and today, Bloomberg Businessweek explains the Kate Spade acquisition in the same terms:
The long-anticipated deal brings a high-profile brand to Coach and may help remedy the handbag industry’s broader woes. The companies have struggled to get customers to pay full price, and a reliance on the beleaguered department-store channel has hurt sales. That’s led Coach and other to focus more on its own specialty stores, an area where it hopes to use Kate Spade to fuel growth.
Coach also recently poached Bergdorf Goodman president Joshua Schulman to serve as “brand president and CEO.” “His appointment comes at a key time for the leather goods house, which recently celebrated its 75th anniversary, as it seeks to add more brands to its portfolio, strategically positioning itself as a luxury goods group, and is the latest move to elevate Luis’ role as head of the group,” Business of Fashion explained. Luis has spearheaded Coach’s reposition as, BoF put it, “approachable luxury.”
Though, Bloomberg Intelligence analyst Chen Grazutis said the price tag “isn’t as robust as we thought it would be at the beginning,” and, “It doesn’t bode well for other brands’ valuation.”
The best place to purchase Coach remains antique malls.