Just months after Coach began to see promising results from pursuing wealthier customers and selling more high-end bags, the accessories company is ready to reward itself with a little something: rival handbag and accessory brand Kate Spade.
Coach announced today that it will pay $2.4 billion for Kate Spade; preparing to throw the accessories wedding of the year and create a “luxury lifestyle company.”
The acquisition, which is expected to close in the third quarter of the year, has already received unanimous approval from the boards of both companies.
By acquiring Kate Spade, Coach is working to increase its presence in the millennial market, hopefully turning those shoppers into life-long customers.
“We are confident that this combination will strengthen our overall platform and provide an additional vehicle for driving long-term, sustainable growth,” Victor Luis, CEO of Coach, said in a statement.
Under the deal, Coach says it believes the two complementary companies will realize about $50 million in synergies within the first three years of the deal closing.
For it’s part, executives at Kate Spade say the deal was reached after a “thorough review of strategic alternatives” and that the brand looks forward to following Coach’s leadership and expertise.
In recent years, that expertise has including streamlining its business model in light of falling sales and fleeing customers.
Coach CFO Kevin Wills notes that once the acquisition is final, Coach will begin to implement many of its business strategies — which the company credits with turning around lackluster sales — at its smaller rival. Specifically, Wills says the company will reduce the number of promotions and flash sales at Kate Spade stores.
Other measures Coach has taken in recent years include rising prices, closing stores, pulling back inventory from department stores, and excluding its products from department store sales or coupons.
While Coach recently reported that it was doing better under the revamped sales system, Kate Spade has continued to flounder, blaming some of its lost sales on fewer tourists shopping while visiting the states. Additionally, in 2015, the company closed all of its younger-focused Kate Spade Saturday and men’s Jack Spade locations.
by Ashlee Kieler via Consumerist