Hoping to keep up with its millennial buyers, multi-luxury fashion company Coach buys rival bag designer brand, Kate Spade New York in its biggest deal yet.
The deal gives Coach ownership of the smaller accessories rival. The $18.50 per share offer in cash, represented a premium of 9% of Kate Spade’s close last Friday. Kate Spade’s stock trading was at $18.36 on Monday while Coach’s shares were up by 5% at $44.80. However, despite its shares having risen 17% since December 27, reports emerged that the New York company was looking to sell itself a day later, shocking many handbag lovers worldwide.
Loved for their quirky bag designs and subtle logos, Kate Spade New York struck with the millennials. The lifestyle band prided itself on their “crisp colour, graphic prints and playful sophistication (which) are the hallmarks of Kate Spade New York”. Emphasising on the desire to ‘live colourfully’, the brand has a range of handbags, jewellery, fashion accessories, fragrance, shoes and recently kitchen utensils and bedding etc.
However, like many luxury handbag makers, including Coach, they have struggled to live up to market expectations, fierce competition and a drop in traffic in department stores.
The recent deal has sparked a clear divide of both positive and negative reviews. Business analysts have praised Coach for its success and its recent comeback, seeing the deal as a positive change. Coach CEO, Victor Luis views it as an optimistic change and opportunity for both Coach, Kate Spade and the rest of the handbag market. He is currently banking on Kate Spade’s appeal with millennials.
“We are very excited that Kate Spade has strength with the millennial consumer, we see that not only through their sales but their online engagement.” – Victor Luis CEO Coach
Business analysts alike have voiced similar views towards the deal, calling Kate Spade a ‘good fit’ for Coach. As Coach has been looking for an acquisition for months, Cowen & Co analyst Oliver Chen praises Coach for obtaining a powerful brand at a reasonable price. Coach is expecting $50 million in savings within three years.
On social media platforms, however, reactions towards the recent deal, ranged from outrage to disappointment (to put it mildly). Customers loyal to Kate Spade and Coach feared the overall outcome affect on both brands.
TBH. I’m scared that coach is going to ruin Kate Spade. I like that it’s quirky & not as big of a brand, & still has a more boutique feel.
— Em F?x (@EmFox925) May 8, 2017
Customers who adore Kate Spade fear the designer brand will lose its quirky designs and graphic patterns in favour of Coach’s classic aesthetic. Coach lovers fear an integration of two very different fashion houses. The result; a half-hearted lifestyle brand with clashing motifs, or as people have been referring it on twitter, ‘#CoachingKateSpade’. Others also fear popular Kate Spade products will become overpriced and move toward’s Coach’s tendency to favour quantity over quality.
But the question remains. Coach + Kate Spade: Will it attract the millennials? Whatever the outcome of this unusual deal, we hope it keeps loyal lovers of both Kate Spade and Coach, satisfied.
