Kate Spade had been shopping itself around as its profit margins were suffering, and after exploring strategic alternatives, the company agreed to the deal with Coach, which came in May.
“The combination of Coach, Inc. and Kate Spade & Company creates a leading luxury lifestyle company with a more diverse multi-brand portfolio supported by significant expertise in handbag design, merchandising, supply chain and retail operations as well as solid financial acumen,” the company said in a statement Tuesday. “Coach’s history and heritage, multi-channel, international distribution model and seasoned leadership team uniquely position it to drive long-term sustainable growth for Kate Spade.”
Though coming under one umbrella, the two brands will remain separate as far as the consumer and the product is concerned, but the match is one analysts think may be made in heaven.
“We believe Kate’s ability to expand outside of the core handbag business will serve as a catalyst for the Coach brand,” Canaccord Genuity analyst Camilo Lyon told Barron’s late last month.
What’s more, he added, Kate Spade could bring Coach some much needed millennial shoppers and Coach could bring Kate Spade some much needed international attention.
“Asia is of particular focus since Kate has virtually no brand awareness in China,” Lyon said. “Following Asia, we expect management to focus on growing Kate’s business in Europe.”
[Read more on what’s happening in handbags: Kors, Kate & Coach: Battle for the Purse Strings]
Retail is in a wave of consolidation as the market—and the consumer—realizes it doesn’t need 47 individual handbag brands and two places to buy gemstone jewelry on TV.
This acquisition is one step in Coach Inc’s plan to build a portfolio of brands, which now puts Kate Spade alongside Stuart Weitzman.
Coach shares were down just over 1 percent to $47.01 at close of trading Tuesday.
The company said it will report its fourth quarter financials on Aug. 15.