News Flash: Multinational luxury fashion company Coach closed on a billion-dollar deal with our go-to stylish girl Kate Spade, but don’t feel betrayed or panicked just yet. The two designers collaborating may just surprise us with the finest fashion yet.
According to Forbes, Coach purchased handbag and accessory upscale fashion company Kate Spade on May 8, 2017. Coach closed on a 2.4-billion-dollar deal with smaller competitor Kate Spade in hopes to accelerate growth within their business by targeting millennials. The shareholders of Kate Spade received $18.50 per share in cash; this signifies a premium 9 percent of Kate Spade’s Friday close. On the following Monday, Kate Spade’s stock was trading $18.36, as Coach’s shares were up 5 percent at $44.80.
Before Kate Spade was bought out, Spade’s shares had skyrocketed by 17 percent sinceDec. 27th. Handbag company Coach expects to see the adjusted financial earnings in 2018 and assumes $50 million in synergies.
Fashion-goers might believe this is the end of the world or feel betrayed that their favorite design was just bought out; this news is something we should not be worried about. The makers of Coach adored how Kate Spade was strong amongst millennials because of its youthful taste in style.
The handbag maker Coach had been analyzing millennials before making the decision to buy Kate Spade and recognized its rival’s active engagement with this particular demographic. Kate Spade’s consumers are 60 percent millennials, and 15 percent are outside of North America sales.
Kate Spade has strengthened its engagement with the millennial consumers, by its flash sales and online engagement.
Marie Goldstein, a blogger, and fashion influencer shared her excitement about Kate Spade’s flash sales. “As a fashion blogger, I am always on a hunt for flash sales that I can share with my readers,” Goldstein said. “Kate Spade is my go-to designer since they have annual sales, flash sales, and holiday sales. They also give out promo codes for bloggers and celebrities who promote them”.
According to Forbes, Coach has faced numerous struggles while trying to live up to market expectations in the aggressive fashion industry. Coach deems that collaborating with designer Kate Spade will enhance their market growth.
Kate Spade was founded by Kate Frances Valentine Brosnahan Spade in 1993 when Spade wanted to design the perfect handbag. The store officially opened in 1996 and 1999, Neiman Marcus Group purchased 56 percent of the Kate Spade brand.
The original Kate Spade brand ship sailed a long time ago. Now, the brand that we all love and enjoy has not been owned by our fabulous Kate herself since the year of 1999. With that said, Coach buying Kate Spade is just another stepping stone to making their brand more successful in this competitive fashion market.
In 2007, Deborah Lloyd became the president and chief creative officer at Kate Spade. Once Lloyd became CEO, she launched the clothing and jewelry collection. Lloyd designed a more sophisticated look for each piece in the store.
As Kate Spade was developing, Coach was changing its product structure, target market, and brand identity. Coach was launching new brightly colored apparel, unusually shaped handbags, and many textured shoes. In 2015 Coach paid $574 million to purchase Stuart Weitzman to help alter its target market. Therefore, this is not Coach’s first rodeo when it comes to brand collaboration.
Courtney Quinn, the blogger behind “Color Me Courtney” and former creative director for both Kate Spade and Coach, shared her opinion on this special collaboration. “Many people think brands merge when they’re bought and that is usually never the case,” Quinn said. “If I had to guess, Kate Spade would continue to operate as a separate organization, with some shared competencies. Having worked for both brands, I can share that they both work differently with similar yet unique structures and I don’t see any reason from them to merge.”
The companies will implement several changes, but not enough to disrupt your colorful wardrobe and shopping habits. Both Kate Spade and Coach work with leather to design their handbags. As a result, prices may slightly increase, and leather standards will be altered at Kate Spade due to the collaboration. Both brands will still operate separately, because of their unique selling structures.
The two companies are New York-based and struggled to maintain a sense of exclusiveness in a competitive retail environment. Therefore, USA Today reported in 2017 that both brands would be limiting constant discounts.
Unfortunately, the fashion collaboration will lead to limited discounts and delivery to help regain brand status, cutting back on flash sales, and Kate Spade will also be cutting back on selling to department stores.
Goldstein, Blogger behind “ThePreppyMAG” and fashion influencer, expressed her feelings about the partnership. “I am concerned that Kate Spade will lose their well-known boutique-feel it has now since they are joining forces with a more global brand,” Goldstein said. “Kate Spade’s designs are loud with color, young, however, still sophisticated, and I am truly frightened that Coach will destroy their reputation.”
Before the two brands merged, Kate Spade had 133 specialty stores, 82 outlet stores and 54 stores in foreign markets. In 2016 they opened 52 new locations that enhanced their income, overall sales, and allowed them to reach more millennials. As Kate Spade was expanding, Coach had been reducing its mark in North America.
Coach closed 30 retail stores within the first quarter of 2017 and hoped the deal with Kate Spade would achieve long-term success. Both brands worked hard individually to generate a successful identity. According to Forbes, Coach is hopeful that it may be easier to close stores in markets where the two retailers tend to compete.
As fashion goers are concerned about the collaboration, a sales floor associate gives us reassurance that we do not have to worry about the two brands merging. Dana Mannarino, a Kate Spade sales associate involved with merchandising and organizing products, describes her excitement about the two brands merging. “I am excited to see the two brands work together to reach millennials,” Mannarino said. “While I Work at Kate Spade, I gain current product knowledge. I am eager to see the shift of products once the Collaboration is in full swing.”
Although Coach bought Kate Spade, the two stores will still be operating in separate locations, and Kate Spade will still have its stunning gold logos and eccentric, colorful designs. Fashion- goers will not be saying goodbye to their all-time favorite unusual-shaped handbags such as animals, cars, or food with the exception of both brands now producing their products with top-notch leather.
After closing this deal, Coach expects $50 million in savings within the next three years. If you think you just lost your best friend Kate, don’t worry any longer, she is coming in hot and better than ever with her fashion go-to girl Coach.