Coach to Buy Kate Spade in $2.4 Billion Deal

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Coach to Buy Kate Spade in $2.4 Billion Deal

The Wall Street Journal

High-end handbag and apparel maker Kate Spade had been exploring a deal to sell the company

Coach Inc. COH +4.78% agreed to acquire rival Kate Spade KATE +8.19% & Co. for $2.4 billion, as the purse maker seeks to tap younger consumers when growth in the handbag market has stalled.

Sales of handbags have slowed as women have traded down to smaller, less expensive bags and aggressive discounting both in stores and online has pressured profits. The proposed merger would combine two big U.S. players, and create a company with $5.9 billion in annual sales and 1,300 retail stores and outlets around the world.

On Monday, Coach Chief Executive Victor Luis said there is little overlap between customers of the two brands, especially since Coach has tried to move upscale in recent years. The attraction of Kate Spade was its appeal to younger shoppers, Mr. Luis said, adding that only 10% of consumers say they buy both brands.

“Kate Spade has the highest penetration among millennials within our competitive set,” Mr. Luis said in an interview. “Millennials offer a market that is substantial in terms of size and allows us to recruit younger customers.”

The handbag market has slowed to about 2% growth from as much as 15% growth six years ago, said Craig Johnson, an analyst at Customer Growth Partners. Coach has responded by targeting a slightly older and wealthier client with higher-priced bags, which has created a gap for younger 20-something shopper that it can fill with Kate Spade, Mr. Johnson said.

Mr. Luis said he still…Read More

 

Lakeem Khodra
Lakeem Khodra
News Writer/Contributor at Tyranny News @lakeemk

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