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Kate Spade Negotiating With Coach Over Takeover

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It looks like Kate Spade could soon find a new home.

The handbag maker has reportedly received an offer for a potential sale to Coach Inc. but no decisions will be made for a few weeks.

Reuters says sources close to the deal indicate that Michael Kors is also still interested in possibly acquiring the brand though the company has not extended an offer.

Though the company’s current market capitalization is $2.9 billion, the sources say a deal would value the company below that level.

With rumors swirling, Kate Spade acknowledged that it was looking for strategic alternatives for the business in February. Coach and Michael Kors have been considered likely suitors from the beginning.

Takeover talk began in November when Caerus Investors, an investor in the firm, issued a letter to the board, asking it to consider selling the company.

Coach is showing signs of a resurgence after the repositioning of its flagship brand, which included tightening distribution, burnishing the marketing campaigns, updating the stores and creating more upscale product. The company reported same store sales were up 4 percent during the second quarter, ended December 31st, 2016. And net sales were up 4 percent during the period.

The brand is in acquisition mode after acquiring the Stuart Weitzman footwear company in 2015. Michael Kors also indicated it is looking for potential acquisitions during its latest earnings call.

Michael Kors, which is the midst of a turnaround, reported retail net sales were up 9.2 percent while comp stores decreased 6.9 percent for the third quarter ended December 31st, 2016. Revenue in the Americas and Europe dropped by 7.4 and 7.0 percent, respectively in the period. Revenue in Asia increased 89.1 percent.

The brand is suffering through many of the same challenges as its competitors namely weak mall traffic and a change in consumer shopping habits. In fact, the company is experiencing many of the issues that plagued rival Coach, prompting it to overhaul its products and business model. In that same vein, Michael Kors has said it is pulling back from department stores in an attempt to insulate its business from heavy promotions; focusing on online sales, including a buy online, pick up in store program; and introducing a more elevated look in its accessories.

 

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