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Coach Buys Stuart Weitzman for $547 Million

American luxury brand Coach announced Tuesday that it has signed a definitive agreement with private equity firm Sycamore Partners to purchase Stuart Weitzman Holdings LLC. Stuart Weitzman will continue as creative director and executive chairman of Stuart Weitzman Holdings LLC.

Under the terms of the agreement, Coach will make initial cash payments of $530 million to the Sycamore Partners, and will make up to $44 million in contingent payments to the firm upon the achievement of selected revenue targets over the next three years.

As Coach ramps up its efforts to claim a piece of the growing affordable luxury market, Stuart Weitzman gives the company the upmarket cache it needs to compete with the likes of Michael Kors and Kate Spade. The company has stepped up its sartorial efforts in the last two years with more high-end advertising, a new men’s footwear collection, and women’s ready-to-wear line revived by creative director Stuart Vevers.

Coach CEO Victor Luis said the size, scope and vibrancy of the Stuart Weitzman brand, along with the continuity of its management team, allows for a seamless transition to Coach ownership, as the company continues to focus on Coach’s brand transformation.

He added, “Over the medium term, we look forward to advancing the Stuart Weitzman brand’s global development, especially by leveraging Coach’s international infrastructure and expertise in handbags and accessories. In addition, we look forward to benefiting from the Stuart Weitzman team’s expertise in footwear development where they’re proven leaders in fashion and fit. Our strong balance sheet provides the flexibility to take advantage of this opportunity while re-investing in our core business and continuing to maintain our dividend at current levels.”

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Over the course of the last five years, Stuart Weitzman has experienced growth with sales increasing at a 10 percent compounded annual rate driven by distribution, ecommerce and same store sales gains. The company has also developed a global multi-channel distribution network including directly operated stores in the U.S. and Europe, international licensed stores and shops-in-shop, and a significant global wholesale business across 70 countries.

Weitzman said, “In Coach, we have found a strategic partner that respects our culture, and offers the scale, resources, and global business acumen to enable us to realize our full potential. We are excited to be working with the Coach team and leveraging its strong infrastructure to help us drive efficiency and expand our product mix to an even broader consumer base worldwide.” He added, “We also look forward to supporting the Coach team with our technical and merchandising expertise in footwear.”