The world woke up this morning to news that Coach would buy fellow American fashion label Kate Spade New York for a cool $2.4 billion. Now, this line of retail news is usually of importance to only a pretty specific group of industry people. (Plus, the deal had been rumored for some months now, so even that particular intersection of folks was ready for the seemingly impending announcement.) Yet when Coach made its official offer public on Monday, as reported by Reuters, it quickly became evident that there were many more stakeholders in the merger than we initially expected.
Pretty quickly, social media was blowing up with reactions, and it was clear that shoppers were feeling some kind of way about news of two customer-favorite — but pretty distinct — brands coming together.
Some people had jokes about the pending acquisition, naturally.
In the past few years, Coach has pivoted towards the luxury sector, swapping its 2000s reputation of logo-heavy wristlets in favor of sleek, Americana-inspired design, courtesy of British designer Stuart Vevers, who joined the company after a six-year stint at Loewe in 2013. Recently, it’s been upping the ante even further with high-profile collaborations with both celebrities (Selena Gomez) and fellow designers (Rodarte). This shift goes beyond aesthetics: Its proven to be good for business, beating quarterly profits according to recent earnings reports.
Kate Spade New York, meanwhile, hasn’t had the smoothest track record: The brand announced a slip in quarterly profits in April — its first in eight years — as it was looking for buyers. (Coach and Michael Kors were the frontrunners then, Bloomberg reported.) Its appeal to the millennial consumer remained strong, though, which was a big draw for Coach CEO Victor Luis, according to a press release from the company. The executive said on a conference call on Monday that the company planned on keeping Kate Spade New York operations independent, so design and marketing is unlikely to change; where Coach will intervene, he explained, is issues with its online sale and wholesale distribution.
"Kate Spade has a truly unique and differentiated brand positioning with abroad lifestyle assortment and strong awareness among consumers, especially millennials," Luis said in a statement. "Through this acquisition, we will create the first New York-based house of modern luxury lifestyle brands, defined by authentic, distinctive products and fashion innovation. additional vehicle for driving long-term, sustainable growth."
Of talk of a then-forthcoming merger, GlobalData Retail analyst Neil Saunders told CNBC that acquiring Kate Spade New York would represent a solid option for even more growth for Coach. (The possibility of it becoming an American LVMH has been floated around the industry, notably by Bloomberg.) "Some of this [growth] will come from the core brand which has the potential to become more of a lifestyle destination," Saunders said, adding that Kate Spade New York is already "in the early stages of developing its own lifestyle brand and would benefit from Coach's sourcing and distribution expertise, as well as some fresh thinking on the design front."
At the very least, Kate Spade New York stans can rest assured that the brand's signature brights and quirks will remain, well, bright and quirky, even after the deal is closed this summer. If anything, the Twitter reaction should make it clear to its new parent company that the aesthetic shouldn't be messed with.