Coach Buys Kate Spade In US$2.4 Billion Deal
With Coach's leather handbag line and Kate Spade's quirky, colorful collection of handbags and accessories through the years, both brands have appealed to consumers. Now, they're ready to join forces and expand their market reach. After months of speculation, handbag maker Coach has announced its plan to acquire Kate Spade for US$2.4 billion. Both brands already saw increase in their share prices after the deal's announcement- as of early May, Kate Spade's stock rose above 8%, while Coach's rose to 5% (Reuters). It's a contrast to vocal social media reactions (enough to get Kate Spade trending on Twitter), as shoppers expressed that the combination of the two loved but distinct brands might spoil the brands' aesthetic.
Kate Spade has reportedly had a number of discounts, and being in the affordable luxury sector, continual discounting would risk the brand's luxury appeal. In a bid to strengthen Kate Spade's brand, it would take in the cue of Coach's strategy of decreasing sales too. And with Kate Spade's approach to becoming a lifestyle brand, Coach is also eying Kate Spade's traction through sales and online engagement with millennial consumers, which could benefit from Coach's distribution channels.
The deal comes after hedge fund Caerus Investors sent a letter to Kate Spade's board to consider a sale in November last year, making Coach's acquisition quite ideal. The transaction is expected to close in the third quarter of 2017, and if the reaction on Twitter is an indication, its new parent company should adhere to its consumers' pleas of keeping in line with the brand's style. After all, the customer is always right.