Product details

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Published by: Amity Research Centers
Published in: 2017

Abstract

Coach, a New York based affordable luxury brand established in 1941, was stressed with dwindling sales figures in 2015-16, difficulty in attracting millennial customers and an inadvertently cultivated brand image of being a brand for masses. Sales figures were so dismal that Coach had rolled out transformational plans to regain its up market and aspirational brand image in 2017. Kate Spade, another New York based fashion retailer established in 1993 and operating in the same affordable luxury space, was also jostling with low profit margins and not making any major breakthrough in the overseas market. Kate Spade, too, was undergoing the process of transforming itself into a fashion and lifestyle brand of global repute. In 2017, both the brands were facing adverse market conditions with consumer spending on luxury products taking a downward slide. Against this backdrop, Coach decided to acquire Kate Spade for a price of USD2.4 billion. The match seemed to be perfect as Coach stood to gain from the robust millennial customer base of Kate Spade and the latter was expected to gain from the vast resources, huge overseas distribution network and a better brand awareness of its acquirer. A key competitor to Coach and Kate Spade in the luxury market was Michael Kors, which was doing marginally well than both Coach and Kate Spade. The game of luxury segment which hitherto had three players, had become a battleground for two players, post the acquisition. But then, would the deal deliver on the desired lines was a million dollar question. Moreover, was this deal a preface to more such market consolidation moves in the luxury segment? How would competitors, such as Michael Kors, react to this acquisition move of Coach? Above all, was this deal really essential?

Time period

The events covered by this case took place in 2017.

Geographical setting

Region:
World/global

Featured protagonists

  • Lillian Cahn (female), Co-founder of Coach
  • Katherine Noel Brosnahan (female), CEO of Kate Spade

About

Abstract

Coach, a New York based affordable luxury brand established in 1941, was stressed with dwindling sales figures in 2015-16, difficulty in attracting millennial customers and an inadvertently cultivated brand image of being a brand for masses. Sales figures were so dismal that Coach had rolled out transformational plans to regain its up market and aspirational brand image in 2017. Kate Spade, another New York based fashion retailer established in 1993 and operating in the same affordable luxury space, was also jostling with low profit margins and not making any major breakthrough in the overseas market. Kate Spade, too, was undergoing the process of transforming itself into a fashion and lifestyle brand of global repute. In 2017, both the brands were facing adverse market conditions with consumer spending on luxury products taking a downward slide. Against this backdrop, Coach decided to acquire Kate Spade for a price of USD2.4 billion. The match seemed to be perfect as Coach stood to gain from the robust millennial customer base of Kate Spade and the latter was expected to gain from the vast resources, huge overseas distribution network and a better brand awareness of its acquirer. A key competitor to Coach and Kate Spade in the luxury market was Michael Kors, which was doing marginally well than both Coach and Kate Spade. The game of luxury segment which hitherto had three players, had become a battleground for two players, post the acquisition. But then, would the deal deliver on the desired lines was a million dollar question. Moreover, was this deal a preface to more such market consolidation moves in the luxury segment? How would competitors, such as Michael Kors, react to this acquisition move of Coach? Above all, was this deal really essential?

Settings

Time period

The events covered by this case took place in 2017.

Geographical setting

Region:
World/global

Featured protagonists

  • Lillian Cahn (female), Co-founder of Coach
  • Katherine Noel Brosnahan (female), CEO of Kate Spade

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