Big news in the fashion world was announced this week when it was revealed the Coach was buying Kate Spade. The 2.4 billion deal is part of Coach’s “consumer focused” goals, with a particular focus on millennial consumers and the desire to build an empire of luxury brands.
“[Kate Spade has] a strong awareness among consumers, especially millennials,” says Coach Inc. CEO Victor Luis in a statement released on Monday.
This deal is occurring in a time when handbag sales are decreasing. Since 2015, Coach was specifically named by The Wall Street Journal as a company that was affected by this negative trend, described as a 16% decrease since 2012.
“The long-anticipated deal brings a high-profile brand to Coach and may help remedy the handbag industry’s broader woes,” says Bloomberg Businessweek in their recent article explaining the big deal, “The companies have struggled to get customers to pay full price, and a reliance on the beleaguered department-store channel has hurt sales. That’s led Coach and other to focus more on its own specialty stores, an area where it hopes to use Kate Spade to fuel growth.”
On the Kate Spade side of things, the brand sees this deal as a great opportunity to cut back on costs. Coach has a supply network in leather goods which will be a great help for the brand. While Coach says Kate Spade is a healthy brand, they do plan to cut back on wholesale accounts and flash sales, which allegedly hurt the brand’s image.
Coach also bought shoe company Stuart Weitzman back in 2015 in a $574 million deal, making Kate Spade the company’s biggest acquisition to date.