Kate Spade Bought Out By Coach

By Maria Pesin | Business

Nov 09

 

It’s time to start making our holiday wish list and every woman has put a designer purse at the top of that list. One of our favorite purse brands that we hope to see under the tree has now been sold to an iconic company.

 

Companies buy each other out in the fashion industry all of the time. Just a few months ago, Michael Kors bought out Jimmy Choo. And another company has been added to the 2017 “bought out” list.

 

Kate Spade, a fashion and accessory company that began in 1993, was bought out buy its major competitor, Coach, which began over 50 years earlier in 1941.

 

In a $2.4 billion dollar deal, Coach bought out Kate Spade in July with a transaction of $18.50 for every stock of Coach. The goal of this purchase was to appeal to more millennial shoppers.

 

Kate Spade has struggled in the past few years due to competition and the constant discounting of products.

Coach anticipated reaching $50 million in savings through their inventory management and supply chains. This goal seemed to be out of reach in August when its shares fell to their lowest point in four and a half years after pulling out Kate Spade in nearly half of its department stores. Revenue is projected to be less than predicted at $5.9 billion. The gross margin is expected to continually fall in the 2018 fiscal year, standing at 66.5 percent in August, falling from 67.8 percent.

 

“In an unpredictable environment, we are evolving to drive our long-term success by reinventing ourselves,” Coach Chief Executive Officer Victor Luis said in a statement.

 

Luis continues to hold faith in Kate Spade outlet stores. He plans on opening 25 in the upcoming fiscal year. He also hopes expanding to the men’s market will help the company increase profit

 

Sources:

http://money.cnn.com/2017/05/08/investing/coach-kate-spade-takeover/index.html

https://www.bloomberg.com/news/articles/2017-08-15/coach-declines-after-kate-spade-acquisition-weighs-on-forecast

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About the Author

Maria Pesin knows fashion, especially the business side of the fashion industry. Do you know how Manolo Blahnik got his start in the industry? How he leveraged a paltry 3 grand into one of the world’s most famous luxury brands? While she doesn’t take credit for Manolo’s success, Maria has walked a similar path on numerous occasions. The world of fashion is not silicon valley, and it has nothing to do with Madison Avenue marketing. In this industry there is ALWAYS room for something new and exciting, but you have to have your ducks in a row. If that’s what you need, believe me, Maria is the General Patton of fashion ducks!

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