After securing Kate Spade on a $2.4bn contract, Coach indicates at future deals

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Coach has declared  that considers further acquisitions after signing on their smaller rival Kate Spade for $2.4bn.
8 May 2017 – Financial Times

The New York-based group is hoping to tap the popularity of Kate Spade’s colourful and quirky leather goods among millennials to stimulate its own sales growth.

In announcing the deal on Monday, Coach hinted it could do smaller, bolt-on acquisitions as it continues to diversify away from its namesake brand and transition into a multi-brand fashion conglomerate.

“In the short term, you could definitely say that we’re not going to be looking at any major acquisitions,” said chief executive Victor Luis.

“Certainly, I think . . . we have the financial flexibility to look at other smaller acquisitions in the size of the Stuart Weitzman or smaller.

” Mr Luis made his comments after revealing an agreement to buy Kate Spade for $18.50 per share in cash, following months of rumoured talks.

The offer represents a 9 per cent premium to Kate Spade’s closing price on Friday and a 27.5 per cent premium to the undisturbed price of the stock on December 27 2016, the last trading day before news that the company was exploring a sale.

Like rival Michael Kors, Coach has had experienced difficult trading in recent years.

Its aura of exclusivity became dented by the ubiquitousness of its products and sales were hit by steep discounting in department stores, where it generates a sizeable chunk of its revenue.

A shift in consumer preference for clothing and accessories that do not carry conspicuous labels or logos has also weighed on sales.

Since taking over the top job at Coach in 2014, Mr Luis has cut back on department store distribution in order to regain more control over product pricing.

He has also sought to drive growth through acquisitions.

Mr Luis struck his first major deal in 2015 when Coach beat competition from rivals to acquire women’s luxury shoemaker Stuart Weitzman for $574m to bolster its footwear offering.

More recently the company made a takeover approach for Burberry, the UK’s biggest luxury goods retailer. The efforts were rebuffed and since then Coach has been a rumoured suitor for other companies including shoe maker Jimmy Choo.

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